Judge: Blaine K. Bowman, Case: 37-2022-00005365-CU-BT-NC, Date: 2023-12-22 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - December 21, 2023

12/22/2023  10:00:00 AM  N-31 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Blaine K. Bowman

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Civil - Unlimited  Business Tort Demurrer / Motion to Strike 37-2022-00005365-CU-BT-NC SELKER VS XCENTRIC VENTURES [IMAGED] CAUSAL DOCUMENT/DATE FILED: Notice of Hearing, 09/20/2023

The Demurrer brought by defendant Xcentric Ventures LLC (Defendant) is SUSTAINED with leave to amend. Deadlines to plead in light of this ruling shall be as set forth in California Rules of Court, rule 3.1320.

The Request for Judicial Notice brought by plaintiff Mark Selker (Plaintiff) is GRANTED pursuant to Evidence Code § 452, et seq.

Background Plaintiff is a fine art dealer who lives in San Diego. Defendant is alleged to be an Arizona limited liability company that owns and runs a website called 'ripoffreport.com' (hereinafter, RipOff).

Plaintiff alleges that a user on RipOff posted comments insinuating that he was a sex offender and engaged in 'improper filming of a child during a recent relationship.' Plaintiff alleges that these comments were the cause of his later having difficulty selling his art and renting rooms to prospective tenants in the home he was residing in in Rancho Santa Fe.

Plaintiff's allegation is that he contacted Defendant regarding having the comments taken down and that, in response, Defendant offered two 'services.' One of those services was, for lack of a better word, the 'lesser' service of un-indexing or de-indexing of the comments. As best as can be determined from the allegations and the briefing, this un-indexing or de-indexing service (which the evidence and briefing refers to as the 'No Index' service or offer) does not actually remove the comments from the website.

Instead, this 'No Index' service does something more algorithmic so that when others perform a search using a search engine (like Google) these comments are far less likely to pop up. Said another way, after the 'No Index' service, a user who specifically goes to the RipOff website could still see these comments about Plaintiff, but a user who merely goes and performs a broader search using a common search engine would be less likely to get a 'hit' that would pop-up from the RipOff website after doing such a search. Thus, although the comments would remain in existence on the RipOff website, from a practical standpoint they would be less likely to be seen because people who do searches generally do them on broader search engines rather than specifically going to the RipOff site.

The second service that Defendant offered was an arbitration service to provide a forum for the party against whom the damaging comments were made (in this case that would be plaintiff Selker) to challenge the person who actually made and posted the comments (in this case that would be a user under the name of 'boba' who allegedly lives in Encinitas). Under this service, it would appear from the allegations that Defendant has the final say on which comments get taken down and which comments Calendar No.: Event ID:  TENTATIVE RULINGS

3022957 CASE NUMBER: CASE TITLE:  SELKER VS XCENTRIC VENTURES [IMAGED]  37-2022-00005365-CU-BT-NC remain up. There appears to be a significant factual dispute between the parties as to whether this decision making should be considered 'editorial' publication work or 'arbitration' dispute resolution work. The reason for this apparent dispute is that, very broadly and generally speaking, federal law protects those who run websites from being liable for comments posted by third-party users as well as from editorial decisions about what to allow to remain on a website and what to take down.

It appears that Plaintiff wanted to make modifications to the terms before purchasing the arbitration service. However, unsuccessful in negotiating those terms, Plaintiff ultimately did not purchase the arbitration service. Plaintiff is nonetheless now suing Defendant for violation of California's Unfair Business Practices statute (Business and Professions Code § 17200, et seq.) on a theory that the terms on which the arbitration service was being offered were extortionate. To recite the framing of the claim in Plaintiff's own words: ...in order for Ripoff to take action against defamatory information, Ripoff presented [Plaintiff] with a 'take-it or leave-it' contract. The contract Ripoff presented [Plaintiff] with a Hobson's choice: continue to suffer irreparable harm to his reputation, his income, and his livelihood; or be forced to enter a 'voluntary' VIP Arbitration with Ripoff and pay thousands of dollars. [Citation.] (Opposition, p. 7:3-6.) At the heart of its 'business,' Ripoff profits from defamatory, indecorous, and otherwise harmful Reports, and then doubles-down on those profits by forcing victims to pay exorbitant fees and spent resources defending themselves in a faux arbitration. (Opposition, p. 7:11-14.) While the Court has some doubt about certain aspects of these arguments, the main thrust appears to hold. For example, Plaintiff argues he would be forced to enter a voluntary arbitration 'with Ripoff,' but the allegations seem to indicate that the arbitration would not be 'with Ripoff' in the sense that Defendant would be the adversary in the arbitration proceeding; rather, it appears that Defendant would be the arbiter and the proceeding would be 'with' or between Plaintiff and the person who posted the allegedly defamatory comments. Given that Defendant has ultimate power over what is posted on the Ripoff website, the characterization that the arbitration would be 'faux' also seems to be a bit suspect as there is no allegation that Defendant offers these arbitration services and then does not follow through and provide fair arbitration proceedings. In other words, there do not seem to be sufficient allegations that the arbitration service being offered is not legit – just that it is offered on a 'take it or leave it' basis.

Merits of Motion Defendant's argument on demurrer takes a two-step approach. First, Defendant frames the harm here as stemming from the defamatory comments. Plaintiff's response to this framing attempt is as follows: [Plaintiff]'s UCL cause of action does not attempt to hold Ripoff civilly liable for 'making available information' or 'restricting access to materials,' which the [federal law] precludes. Instead, Plaintiff attempts to hold Ripoff civilly liable for, through its separate VIP Arbitration service, extorting, blackmailing, and holding for ransom [Plaintiff]'s, and all others similarly situated, marketability and economic fruition. (Opposition, p. 9:3-8.) Bolstering its argument, Plaintiff notes that Defendant removed this case to federal court, but when analyzing whether federal question jurisdiction applied, the federal district court provided as follows: Defendant's Notice of Removal argues that the Communications Decency Act (the 'CDA') 'completely preempts the claims brought by Plaintiff here.' {Citation.} In support of its contention, Defendant cites the CDA itself and Murphy v. Twitter, 60 Cal.App.5th 12, 24 (2021). But Defendant misstates the law. First, Defendant quotes 47 U.S.C. § 230(e)(3) of the CDA, which states that '[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.' However, the first sentence of § 230(e)(3) reads that '[n]othing in this section shall be construed to prevent any State from enforcing any State law that is consistent with this section.' Although there is a potential for ordinary, conflict preemption, the explicit language of the statute establishes that Congress did not intend the CDA to completely preempt state law. {String citation.} Calendar No.: Event ID:  TENTATIVE RULINGS

3022957 CASE NUMBER: CASE TITLE:  SELKER VS XCENTRIC VENTURES [IMAGED]  37-2022-00005365-CU-BT-NC Second, Defendant's contention that Murphy v. Twitter recognized a complete preemption of Plaintiff's state law claims in this case is misleading. {Citation.} Murphy cited the language of § 230(e)(3) that state law must be consistent with the CDA but does not hold that the CDA completely preempts state law.

(ROA 58, Ex. 1, pp. 8:1-9:5.) The federal district court went on to more heavily distinguish the case of Murphy v. Twitter (2021) 60 Cal.App.5th 12 by noting that the Murphy court was reviewing an order sustaining a demurrer, while the federal district court in this case was reviewing the question through the particular lens of whether or not to remand the action, which involved different legal standards.

Summarizing the above, Defendant is framing the harm being claimed by Plaintiff as being a harm for defamation so that, in turn, Defendant can invoke federal law because federal law provides Defendant immunity from liability for defamation committed by those third-party commenters. Plaintiff resists this reframing by arguing that he is not suing for defamation, but, rather, for the offering of arbitration services on an extortionate basis with take-it or leave-it terms.

The reason this arguments has some persuasive value is because without the underlying defamation there would be no harm to Plaintiff. In other words, the root-level problem here that is causing the damages to Plaintiff is the publication of the defamatory comments. Were there no defamatory comments up on the Ripoff website, the whole question of whether to purchase Defendant's arbitration services would be moot. Though not addressed in the briefing this notion appears to touch on concepts of 'intervening cause.' The defense of superseding cause absolves the original tortfeasor, even though his conduct was a substantial contributing factor, when an independent event subsequently intervenes in the chain of causation, producing harm of a kind and degree so far beyond the risk the original tortfeasor should have foreseen that the law deems it unfair to hold him responsible. [Citation.] In criminal cases, intervening causes are typically described as either dependent or independent. [Citation.] A dependent intervening cause breaks the chain of causation and does absolve the defendant. (Chanda v. Federal Home Loans Corp. (2013) 215 Cal.App.4th 746, 755 (cleaned up).) Of course, the doctrine is not directly applicable here because the doctrine discusses absolving the original tortfeasor (which would be the individual who posted the alleged defamatory comments). Here, the original tortfeasor is not even a named party. Nevertheless, the concept is apt that when there is an existing harm, a subsequent intervening cause can come in an change the causal scenario.

The piece that seems to be missing here, perhaps critically, is a deeper analysis of the nuances of federal law and the preemption of the CDA. The federal district court that heard this very case ruled that: 'It is clear that the CDA does not completely preempt state law...' (ROA 58, Ex. 1, p. 9:18.) From what this Court can tell at this juncture, it appears that the CDA preempts state law that might hold an owner of a website liable for defamatory comments posted by third parties, but does not preempt defamation committed by those third parties. The more nuanced question comes when examining other actions that an owner of a website might take: such as editing or removing content posted by third parties. Defendant argues that under Murphy v. Twitter (2021) 60 Cal.App.5th 12 and Barnes v. Yahoo!, Inc. (9th Cir. 2009) 570 F.3d 1096 the liability shield provided to owners of websites applies whether they are making a decision to allow third party content to be published in the first instance or making a decision to remove material that has already been published.

The instant case, however, is slightly different from Murphy and Barnes because Defendant is not making editorial decisions on its own; rather, the business practice Defendant is engaged in is the selling of an arbitration service. At least as commonly understood, the role of an editor and the role of an arbiter are fairly distinct and different. The former makes content decisions and modifications on a regular basis, while the latter hears out disputes between two or more adversarial parties and is in the role of a neutral. It is a little bit odd to be framing arbitration services (which this Court sees on a regular basis Calendar No.: Event ID:  TENTATIVE RULINGS

3022957 CASE NUMBER: CASE TITLE:  SELKER VS XCENTRIC VENTURES [IMAGED]  37-2022-00005365-CU-BT-NC when ordering civil matters to arbitration or confirms arbitration awards) as the exercise of 'editorial discretion,' which is precisely what Defendant appears to be doing. (ROA 44, p. 10:8-9, quoting Murphy v. Twitter (2021) 60 Cal.App.5th 12, 30.) Without more detailed briefing on the issue, on the spectrum between editorial services and arbitration services, this Court must indulge the allegations and draw inferences in Plaintiff's favor on demurrer, and thus construes the alleged services as arbitration rather than editorial decisions that would be shielded by the CDA.

Indeed, as alleged, the services being offered by Defendant stand in stark contrast to what one might think of as editorial work. The allegations do not describe a situation in which workers on staff at Ripoff review complaints about allegedly defamatory posts and make independent decisions about what content to allow. Instead, the allegations describe Ripoff offering a service to the public – a service for which Ripoff charges a fee and requires customers to enter into an agreement. At least as alleged, that would appear to be a business practice.

This brings the analysis to the second-step of Defendant's argument, which is that Plaintiff was not harmed by the business practice itself – that is, after reframing the 'business practice' as the posting of the defamatory comments rather than as the offering of arbitration services. For this proposition, Defendant relies on the case of Demeter v. Taxi Computer Services, Inc. (2018) 21 Cal.App.5th 903 for the proposition that Plaintiff cannot maintain a claim of unfair business practices (particularly not on a class action basis) unless he can establish his own standing in the form of being the victim of some direct harm or injury. The Court finds Demeter readily distinguishable from the instant case. In Demeter, the plaintiff was referenced as a 'stalking horse' who worked for a competitor and had signed-onto the services being offered for the mere purpose of making a legal challenge. Demeter, supra, 21 Cal.App.5th at 909. More critically, the plaintiff in Demeter signed up for the services in question and the contract at issue in Demeter had a 'provision that would permit him to obtain a full refund of the membership fee he paid.' Id. Moreover, the plaintiff in Demeter 'acknowledged he had not attempted to cancel his contract with TAXI (i.e., invoked his contractual right to a refund) prior to filing suit...' Id. at 909. In other words, the plaintiff in Demeter had a way out of the unfair business practice that was at issue (a claim that he was misled into the contract due to the business at issue failing to have complied with certain aspects of the law's bond requirements). In stark contrast, Plaintiff in the instant action does not have a similar 'way out.' Here, given that the comments that have been posted are on a website that Defendant owns and controls, Defendant's proffer of arbitration services is a bit monopolistic – since no one else has the power to remove the allegedly defamatory comments, no one else provides 'competition' as far as offering arbitration services. Defendant is in the unique position of being able to force the third-party commenter to take down the comments – something no other provider of arbitration services could offer unless the third-party commenter consented to be bound by a determination by that arbitrator. In other words, in the context of normal arbitration, there are a number of arbitration services available and parties can contract to use whichever they choose (AAA, JAMS, and JudicateWest are some of the more common providers of arbitration services). That selection is via negotiation. And, even when that negotiation is on a 'take it or leave it basis' there is a disconnect between the contract for services and the arbitration clause – i.e. when one enters into a contract with one's cellular service provider the subject matter of the contract for services is the wireless data, the arbitration is ancillary to that main service. Here, Defendant has the power to 'hold Plaintiff hostage' in a way because Plaintiff cannot go anywhere else to obtain the services Defendant is offering.

The question still remains, however, whether Plaintiff suffered damages from the mere offering of these arbitration services. Plaintiff cites the case of Kwikset Corporation v. Superior Court (2011) 51 Cal.4th 310, 323, for the proposition that: There are innumerable ways in which economic injury from unfair competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or Calendar No.: Event ID:  TENTATIVE RULINGS

3022957 CASE NUMBER: CASE TITLE:  SELKER VS XCENTRIC VENTURES [IMAGED]  37-2022-00005365-CU-BT-NC property, that would otherwise have been unnecessary. (Citation omitted.) The problem in this case, however, is that Plaintiff did not surrender to the transaction. As identified above, Plaintiff entered into a contract for the 'No Index' service, but Plaintiff did not enter into a contract for the Arbitration Service. The scenario this establishes, however, is somewhat problematic – as Plaintiff characterizes it, a 'Hobson's choice.' If Plaintiff does not enter into the contract for arbitration services, then, according to Defendant, Plaintiff never acquires standing to sue to challenge the allegedly unfair terms of the offer. On the other hand, if Plaintiff does enter into a contract for arbitration services (the arbitration service that would be provided by Defendant), that contract itself had an arbitration clause that would require Plaintiff to make any unfair business practice challenges to an arbitrator and not in a court of law. The notion that there is any 'fair negotiating' taking place in such a context is a farse.

On the other hand, federal law has seen fit to immunize owners and operators of websites where third parties post defamatory comments. The fact that Plaintiff is undergoing a harm (in the form of defamatory comments that remain posted about him) is not a harm for which Defendant can be liable under federal law. Therefore, in order to maintain a cause of action for unfair business practices against Defendant, Plaintiff has to at least allege some other harm – i.e. some harm other than ongoing defamation or derivatives of that defamation. Said another way, in any other website defamation context where arbitration services are not offered by the website provider, a victim of defamation has whatever remedies he or she has under the law. The proffer of arbitration services is an added, extra option available in this circumstance, but it does not somehow diminish the options that are normally available to any other victim of defamation. While this added, extra option seems, at least as alleged, to be extortionate, Plaintiff need not avail himself of said services, and the decision not to avail himself of said services leaves him in the same position as any other victim of defamatory comments made by a third party on a website.

While Plaintiff outlines a number of harms that he suffered, all of them are derivative of the existing defamation. Plaintiff correctly cites law indicating that the necessary showing of harm can be slight in order to establish standing, but Plaintiff's problem is not the number of ways he can split the harms into a long list – it is that all of those enumerated items are dependent upon the original defamation.

There is, however, some suggestion and allusion to the notion that Defendant runs its website precisely to create these kinds of problems. In other words, unlike a classic Facebook, Yelp, or Amazon website that is ubiquitous and neutral (at least as to most things like allowing comments about products), there is some suggestion here that Defendant may uniquely target and seek out negative commentary precisely so that it can force consumers into the extortionate position that Plaintiff is alleging he was in. If that were the case, it would appear that Defendant would move beyond its shielded position under federal law of merely being the owner of a website not responsible for third-party comments and into a more active role of participating in the publication of the defamatory comments in order to drum-up business for its 'No Index' and 'Arbitration' services. If that could be shown, or even alleged in good faith, there might be a basis to circumvent the legal protections provided under federal law. However, as currently alleged, there is enough separation between Defendant and the third-party who posted the allegedly defamatory comments that Defendant cannot (and does not appear to) be sued for defamation directly, and there are no harms alleged that do not derive from the defamation. In such circumstance, Plaintiff has not stated a cause of action for violation of Business and Professions Code § 17200.

Unless the ruling(s) above indicate that an appearance is necessary, parties who wish to submit, who are satisfied with the above tentative ruling(s), and/or who do not otherwise wish to argue the motion(s) are encouraged to give notice to the Court and each other of their intention not to appear.

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