Reply Brief in Support of Motion to Dismiss - North Carolina by Levone




JEFFREY A. and LISA S. HILL, individually and on behalf of all others similarly situated, Plaintiffs, v. StubHub, Inc. d/b/a “StubHub!” and/or “”, “John Doe Seller 1”, and “John Doe Sellers 2, et al.”, Defendants.

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John H. Culver III N.C. Bar No.: 17849 Kennedy Covington Lobdell & Hickman, LLP Hearst Tower, 47th Floor 214 North Tryon Street Charlotte, North Carolina 28202 Direct: 704-331-7400 Fax: 704-331-7598 Email: Michael J. Klisch Joshua M. Siegel Cooley Godward Kronish LLP 777 6th Street, NW, Suite 1100 Washington, DC 20001 Direct: 202-842-7800 Fax: 202-842-7899 Email: Admitted Pro Hac Vice Michael G. Rhodes Cooley Godward Kronish LLP 4401 Eastgate Mall San Diego, CA 92121-1909 Direct: 858-550-6000 Fax: 858-550-6420 Email:

Admitted Pro Hac Vice

ARGUMENT I. THE COURT CAN PROPERLY GRANT STUBHUB’S MOTION TO DISMISS. A. The Court can Consider StubHub’s Website and User Agreement.

Plaintiffs argue that the Court should deny the Motion to Dismiss (“Motion”) because StubHub relies on its User Agreement and website (“Website”). Opposition, p. 7. The Court should reject this argument because plaintiffs specifically refer to the User Agreement and Website in the Complaint and, under settled law, the Court can consider the referenced materials on a motion to dismiss. See Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52, 60-61 (2001) (finding that the court properly considered documents that were “specifically referred to in the complaint”); Jacobs v. Royal Ins. Co. of Am., 128 N.C. App. 528, 530 (1998) (holding that a court may consider evidence contained in the pleadings); see also Coley v. North Carolina Nat’l Bank, 41 N.C. App. 121, 127 (1979) (“We do not think defendant‟s Rule 12(b)(6) motion to dismiss was converted into one for summary judgment by the trial court‟s referring to the contract which was the subject of the action and specifically referred to in the complaint.”). Specifically, the Complaint cites to StubHub‟s User Agreement and Website. See, e.g., Compl. ¶ 5 (“StubHub operates a website,, dedicated exclusively to the resale of tickets to live entertainment events.”); Id. at ¶ 10 (“[StubHub] forbids, in its User Agreement, John Doe sellers from identifying themselves . . . .”). Accordingly, the Court should consider StubHub‟s User Agreement and Website.1


A court may convert a motion to dismiss into a motion for summary judgment. Weaver v. Saint Joseph of the Pines, Inc., 652 S.E.2d 701, 707 (N.C. Ct. App. 2007) (holding that if the court considers documents not referenced in the pleadings on a Rule 12(b)(6) motion, the motion is converted into one for summary judgment).


Section 230 Immunity is Properly Addressed in a Rule 12(b)(6) Motion.

Without citing any North Carolina authority, plaintiffs argue that the Court should not address immunity under Section 230 of the Communications Decency Act (“Section 230”) because it is an affirmative defense. Opposition, p. 9. North Carolina law holds just the opposite. Absent a “showing of prejudice, an affirmative defense may be raised by a Rule 12(b)(6) motion to dismiss.” Johnson v. North Carolina Dept. of Transp., 107 N.C. App. 63 (1992) (emphasis added). When “„the complaint on its face reveals the absence of fact sufficient to make a good claim,‟ dismissal of the complaint under Rule 12 is proper.” Privette v. Univ. of North Carolina, 96 N.C. App. 124, 132 (1989) (citation omitted). North Carolina courts routinely rule on immunity raised in a Rule 12(b)(6) motion. See, e.g., Farrell v. Transylvania County Bd. of Educ., 625 S.E.2d 128 (N.C. Ct. App. 2006) (dismissing case on 12(b)(6) motion on grounds of immunity); Doe ex rel. Connolly v. Holt, 332 N.C. 90 (1992) (asserting parent-child immunity in 12(b)(6) motion); Anderson ex rel. Jerome v. Town of Andrews, 127 N.C. App. 599 (1997) (asserting sovereign immunity in 12(b)(6) motion); cf. Slade v. Vernon, 110 N.C. App. 422, 425 (1993) (“A valid claim of immunity is more than a defense in a lawsuit; it is in essence immunity from suit. Were the case to be erroneously permitted to proceed to trial, immunity would be effectively lost.”) Courts routinely grant Section 230 immunity when raised in a motion to dismiss. See, e.g., Universal Commc’n Sys., Inc. v. Lycos, Inc., 478 F.3d 413 (1st Cir. 2007); Green v. Am. Online, Inc., 318 F.3d 465 (3d Cir. 2003); Doe v. Bates, No. 5:05-CV-91-DF-CMC, 2006 WL 3813758 (E.D. Tex. Dec. 27, 2007); Gentry v. eBay, Inc., 121 Cal. Rptr. 2d 703 (Cal. Ct. App. 2002).


Plaintiffs argue that the plaintiffs in these cases “failed to protest” the appropriateness of raising Section 230 immunity in a motion to dismiss, and that plaintiffs need discovery. Opposition, p. 9. The Bates court dismissed the same argument. In Bates, plaintiffs objected to the determination of Section 230 immunity on a motion to dismiss and asked to conduct discovery. Bates, 2006 WL 3813758, at *8. The court found that Section 230 may be raised in a Rule 12(b)(6) motion, granted immunity, and dismissed the claims despite plaintiff‟s demands for discovery. Id. II. PLAINTIFFS HAVE NO PRIVATE RIGHT OF ACTION UNDER SECTION 14-344. A. There is no Tortious Act Upon Which a Claim of Tortious Action in Concert can be Based.

Plaintiffs argue that StubHub is liable for tortious action in concert with the actual sellers in violating N.C.G.S. § 14-344 (“Section 14-344”), a criminal statute. Opposition, p. 12. Tortious action in concert is described in Section 876 of the Restatement (Second) of Torts (“Section 876”). It states that “[f]or harm resulting to a third person from the tortious conduct of another, one is subject to liability if he: (a) does a tortious act in concert with the other pursuant to a common design with him . . . .” Restatement (Second) of Torts § 876 (1979). North Carolina adopted Section 876 only as it applies to joint tortfeasors. Stetser v. TAP Pharm. Prods., Inc., 165 N.C. App. 1 (2004). The act giving rise to a claim for tortious action in concert must be a “tortious act.” The word “tortious” denotes an act or omission that subjects the actor to liability under the law of torts. Restatement (Second) of Torts § 6. No North Carolina court has permitted a tortious action in concert claim when the “act” is the alleged violation of a criminal statute because it is not a “tortious act.” Plaintiffs concede that their claim rests on StubHub‟s alleged violation of Section 14-344 being “the wrongful act giving rise to [p]laintiffs‟ claims.” Opposition, p. 12. Plaintiffs‟ claim 3

fails as a matter of law because a violation of Section 14-344 is a criminal act, not a “tortious” act, which is insufficient to state a claim for “tortious action in concert.” B. An Alleged Violation of Section 14-344 Cannot form the Basis of a Civil Conspiracy.

Plaintiffs seek to hold StubHub liable for an alleged civil conspiracy with the sellers to violate Section 14-344. Opposition, p. 12. Plaintiffs “must prove the existence of the agreement between the defendants, that one or more of the conspirators committed an overt, tortious act in furtherance of the conspiracy, and that plaintiffs suffered damages caused by acts committed pursuant to the conspiracy.” Coleman v. Shirlen, 53 N.C. App. 573, 577 (1981) (emphasis added). A claim of civil conspiracy only associates the defendants together for liability. Dove v. Harvey, 168 N.C. App. 687, 690 (2005). Because the claim requires a “tortious act,” no North Carolina court has held that a plaintiff can recover damages resulting from a conspiracy to commit a criminal act -- here, a misdemeanor. Instead, courts only enforce the claim where the damages result from a wrongful civil act. See, e.g., Dove, 168 N.C. App. at 690 (holding that civil conspiracy must be based on allegation of breach of fiduciary duty, negligence or gross negligence). Here, plaintiffs concede that the conspiracy claim is based on an alleged violation of a criminal statute. Thus, the claim fails as a matter of law. III. PLAINTIFFS’ ARGUMENTS HAVE NO EFFECT ON STUBHUB’S SECTION 230 IMMUNITY. A. Plaintiffs Seek to Hold StubHub Liable as a Publisher.

Plaintiffs argue that they “do not seek to hold StubHub liable for publishing anything,” but for “selling and offering to sell” tickets.2 Opposition, p. 15. Plaintiffs ignore the allegations


Plaintiffs do not dispute that StubHub satisfies the first element of Section 230 immunity -- that it is an “interactive computer service” provider.


in their Complaint -- that StubHub provides free ticket listings, selects which tickets can be sold, adds events upon request, and displays ticket advertisements -- which are precisely the type of “traditional editorial functions” of a publisher, namely, “deciding whether to publish, withdraw, postpone or alter content,” and which are immune under Section 230. Zeran v. Am. Online, Inc., 129 F.3d 327, 330 (4th Cir. 1997). Moreover, plaintiffs do not refute that the other alleged conduct of StubHub -- marketing its services, receiving commissions from sales, accepting payment for ticket sales, and providing insurance on tickets -- have specifically been held to not strip Section 230 immunity. See Stoner v. eBay, No. 305666, 2000 WL 1705637, *2 (Cal. Super. Ct. Nov. 1, 2000) (holding that defendant was immune under Section 230 because neither marketing, taking a commission, accepting payment, nor providing insurance make it a content provider). In short, plaintiffs never articulate why StubHub should fall outside Section 230‟s broad grant of immunity. While plaintiffs try to argue around immunity, they cannot change the essential allegations of their claims, which either seek to hold StubHub liable as a publisher (which Section 230 bars them from doing) -- or are extraneous allegations which have been held to not strip immunity. B. Whether StubHub is a Ticket Seller is Irrelevant, as the Only Relevant Issue is that StubHub does not Create the Ticket Price.

Without mustering an explanation (and citing no law), plaintiffs conclude that StubHub is “outside the reach of Section 230 immunity” by being a ticket seller. Opposition, p. 16. Whether StubHub is a ticket seller, however, is immaterial to whether StubHub is an “information content provider” of unlawful content under Section 230.


Merely selling tickets is not unlawful. Each of plaintiffs‟ claims is predicated on the allegation that tickets on the Website sell at unlawful prices.3 In other words, if the ticket‟s price is within the amount permitted by Section 14-344, plaintiffs have no claim. Thus, the only allegedly unlawful content is the ticket‟s price, not the “selling” of tickets. Under Section 230, the Court must evaluate whether the specific allegations in the Complaint -- not merely “conclusory, unwarranted deductions of fact” -- contain well-pleaded facts that allege that StubHub creates the ticket price. See Good Hope Hosp. v. Dept. of Health, 620 S.E.2d 873, 880 (N.C. Ct. App. 2005) (“[A court need not] accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.”). The Complaint alleges that StubHub “sold and/or facilitated in the sale” of tickets to plaintiffs “with knowledge” that they could be sold in excess of face value. Compl. ¶ 11 (emphasis added).4 On the basis of this allegation alone, plaintiffs conclude that “[t]hrough its actual involvement in pricing tickets, StubHub creates and develops content on its website.” Opposition, p. 5. Plaintiffs do not explain anywhere what “actual involvement” StubHub is engaged in. Mere “knowledge” of the sale price clearly does not constitute “creation” of the sale price. In short, plaintiffs fail to allege any facts that could show -- even in the most favorable light -- that StubHub creates a ticket price (that is, StubHub is not alleged to be the statutory “information content provider” with respect to the allegedly unlawful content). Plaintiffs‟ single-sentence attempt to defeat immunity is a conclusion and no more.

“Section 230 does not provide that an intentional violation of criminal law should be an exception to the immunity from civil liability given to internet service providers.” Bates, 2006 WL 3813758 at *4.

Apparently recognizing that StubHub is not the actual seller, plaintiffs allege that StubHub “advised and encouraged” the actual sellers to sell tickets at market value. Compl. ¶ 11. StubHub cannot both “advise and encourage” the actual seller and be the actual seller. Moreover, as discussed infra, StubHub‟s alleged “encouragement” is insufficient to remove Section 230 immunity.



Even if Relevant, Plaintiffs’ Argument That StubHub is a Ticket Seller is Unavailing.

Even assuming that StubHub is a “seller,” that does not strip StubHub of immunity. Rather, to lose immunity under Section 230, StubHub must provide the illegal information (i.e., an unlawful ticket price). Merely alleging that StubHub “provides” tickets is insufficient because, as plaintiffs concede, “tickets do not fit within any plausible definition of „information.‟” Opposition, p. 14 n.7. Thus, even if StubHub “provides” tickets, it does not “provide” information, let alone unlawful information. Hence, StubHub is afforded immunity. Moreover, plaintiffs argue that StubHub is a ticket “seller” -- while also incorporating the User Agreement and Website into the Complaint, which state: “[y]ou are buying tickets from a third party; neither nor StubHub, Inc. is the ticket seller,” that “StubHub acts as a marketplace only to allow buyers and sellers to interact regarding tickets,” and “[i]n all cases, the submission and confirmation of orders are transactions between Buyers and Sellers only.” Exhibit 1 to Siegel Decl., ¶¶ 2.1, 8.3; Exhibit 2 to Siegel Decl. Nevertheless, plaintiffs argue that StubHub -- “not a third party” -- sold the tickets. Opposition, p. 16. None of plaintiffs‟ “facts,” however, make StubHub a ticket seller. The Complaint, for example, states that StubHub “marketed and offered” tickets for sale, “offered them for sale on behalf of Defendant „John Doe Seller 1,‟” “advised and encouraged” others to sell tickets, and provided services to the actual sellers. Compl. ¶¶ 10, 11. Indeed, plaintiffs also concede that they requested StubHub identify the actual sellers and that another court in a different case ordered StubHub to produce documents identifying the individuals who sold tickets on the Website. Id. Plaintiffs‟ claim that StubHub is a ticket seller flies in the face of their Complaint, which claims that StubHub “acted tortiously in concert” and conspired with the actual sellers. Id. StubHub cannot conspire or “act in concert” with itself. 7

Plaintiffs argue that they sufficiently have alleged that StubHub is the seller by claiming that StubHub: (1) markets its services; (2) receives commissions from sales; (3) accepts payment for sales; and (4) provides insurance on sold tickets. Opposition, p. 18. Plaintiffs, however, completely ignore the holding in Stoner, which specifically held that this conduct does not strip Section 230 immunity nor does it make the actor a “seller.” See Stoner, 2000 WL 1705637, at *2. As to the remaining facts that allegedly “show” that StubHub is a ticket seller, plaintiffs fail to explain how facilitating the shipment of tickets, prohibiting buyers from contacting the actual sellers, and “sometimes” acting as a will call where buyers can pick up tickets have any bearing whatsoever on the issue. Opposition, pp. 18-19. Plaintiffs urge the Court to consider the allegations of other entities in other litigation, yet argue that the Court should ignore the User Agreement and Website discussed in the Complaint (which show that StubHub is not the ticket seller). Id. at p. 17. Not only do plaintiffs try to steer the Court‟s attention away from their own allegations, but the case they cite held that a court can consider public documents submitted by the movant in support of a motion to dismiss. See id. (citing Norfolk Fed’n of Bus. Dist. v. HUD, 932 F. Supp. 730, 736-37 (E.D. Va. 1996) (considering a document submitted by the movant in support of a motion to dismiss)). If anything, the Court should consider the public documents submitted by StubHub (which plaintiffs reference in the Complaint). D. The Allegation That StubHub Encourages Ticket Sales at “Market Value” does not Strip Section 230 Immunity.

Relying on dicta at the end of the opinion, plaintiffs argue that “encouraging” illegal content strips Section 230 immunity and that StubHub should not be immune because it “encourages” the John Doe sellers “to sell the tickets at their „market value.‟” 8

Compl. ¶ 11. This dicta does not trump the actual holding of the opinion, which says nothing about “encouragement.” Rather, the United States Court of Appeals for the Ninth Circuit expressly held that defendant Roommate was not immune under Section 230 because it “created and developed” the alleged unlawful content by requiring it from the users as a condition of doing business and otherwise using the service: Here, the part of the profile that is alleged to offend the Fair Housing Act and state housing discrimination laws -- the information about sex, family status and sexual orientation -- is provided by subscribers in response to Roommate‟s questions, which they cannot refuse to answer if they want to use defendant’s services. By requiring subscribers to provide the information as a condition of accessing its service, and by providing a limited set of prepopulated answers, Roommate becomes much more than a passive transmitter of information provided by others; it becomes the developer, at least in part, of that information. Fair Housing Council of San Fernando Valley v., LLC, No. 04-56916, slip op. 3445 (9th Cir. Apr. 3, 2008) (emphasis added). The court also held that Roommate was doing “much more than provid[ing] options” as it was asking “discriminatory questions” in order to “solicit (a.k.a. „develop‟) unlawful answers” -- and required the unlawful content “as a condition of doing business.” Id. at 3459. The court‟s ruling was based on the fact that Roommate‟s website was specifically designed to “force” the posting of unlawful content. Id. at 3461 (emphasis added). In other words, a “website would be immune, so long as it does not require [the unlawful content].” Id. at 3464 (emphasis added). If a website operator provides a “framework that could be utilized for proper or improper purposes” or provides “neutral tools” designed to solicit content, lawful or unlawful, it is entitled to immunity as a matter of law under Section 230. Id. at 3468-69 (emphasis added). Close cases on this issue “must be resolved in favor of immunity”: Websites are complicated enterprises, and there will always be close cases where a clever lawyer could argue that something the website operator did 9

encouraged the illegality. Such close cases, we believe, must be resolved in favor of immunity, lest we cut the heart out of section 230 by forcing websites to face death by ten thousand duck-bites, fighting off claims that they promoted or encouraged -- or at least tacitly assented to -- the illegality of third parties . . . section 230 must be interpreted to protect websites not merely from ultimate liability, but from having to fight costly and protracted legal battles. Id. at 3474 (first emphasis in original). Thus, even assuming that StubHub‟s Website somehow “encourages” third parties to sell tickets at market value, plaintiffs‟ claim falls short of the requisite legal standard because there is no allegation that the Website forces, nor does it force, let alone require, unlawful content (i.e., ticket prices that exceed the statutory allowable amount). Rather, at most, the Website provides a “framework that could be utilized for proper or improper purposes” and/or provides “neutral tools” designed to solicit content, lawful or unlawful. Moreover, the “market value” of a ticket is not inherently violative of Section 14-344 because a sale at “market value” could be either lawful or unlawful depending on whether the market value is above or below the face value. In other words, is the market value of Carolina Panthers preseason tickets, which is substantially less than face value, violative of Section 14344? Of course not. Importantly, plaintiffs do not allege that StubHub encourages sellers to list tickets only for a price above face value. See, slip op. at 3468-69 (holding that a website‟s “framework that could be utilized for proper or improper purposes” or “neutral tools” designed to solicit content, lawful or unlawful, do not strip under Section 230). As the court recognized, “there will always be close cases where clever lawyers could argue that something the website operator did encouraged the illegality.” Id. at 3474 (emphasis in original). In such cases, however, Section 230 “must be resolved in favor of immunity.” Id.


In short, the argument that StubHub “encourages” the sale of tickets at “market value” is irrelevant and unpersuasive. Section 230 immunity remains, and any ambiguity must be resolved in favor of immunity. The Court should grant the Motion to Dismiss. E. Plaintiffs Admit that StubHub Merely Provides Neutral Tools.

Plaintiffs‟ argument that the features of the Website somehow strip StubHub of immunity does not make sense and is not persuasive. Rather, the “neutral tools” on the Website that solicit content, lawful or unlawful, are permissible., slip op. at 3468-69 (stating that a website‟s “neutral tools” do not remove Section 230 immunity). According to plaintiffs, the Website‟s features that allow the actual sellers to request that StubHub automatically adjust ticket prices to cover its commission irrespective of price, allow sellers to upload inventory onto the Website, and allow the actual sellers to create prices using the “Declining Price” method subjects StubHub to liability because -- according to plaintiffs -these acts can only be unlawful. Opposition, pp. 22-24. Plaintiffs ask the Court to consider an example of the Declining Price feature, where a ticket has a $50 face value, the seller5 selects a price of $300, and the software automatically reduces the price. Id. at p. 24. However, is not the opposite true? If a ticket has a face value of $300, the seller inputs a price of $50, and the software automatically reduces the price, is that not lawful? Can the Declining Price feature be anything other than a “neutral tool” that could be utilized by sellers “for proper or improper purposes”? No. The features of StubHub‟s Website are used by third-party sellers


Plaintiffs cannot get around the fact that third parties, not StubHub, are the ticket sellers, as plaintiffs‟ example involves a third-party seller inputting the price, not StubHub.


-- as plaintiffs recognize -- for the purpose chosen by the third-party users of the Website. StubHub provides an online marketplace with neutral tools and retains its immunity under Section 230.6 Plaintiffs‟ claims are fatally flawed as a matter of law. CONCLUSION For the foregoing reasons, StubHub respectfully requests that the Court dismiss the Complaint in its entirety. This 17th day of June, 2008. /s/ John H. Culver III John H. Culver III N.C. Bar No.: 17849 Kennedy Covington Lobdell & Hickman, L.L.P. Hearst Tower, 47th Floor 214 North Tryon Street Charlotte, North Carolina 28202 Direct: 704-331-7400 Fax: 704-331-7598 Email: Michael J. Klisch Joshua M. Siegel Cooley Godward Kronish LLP 777 6th Street, NW, Suite 1100 Washington, DC 20001 Direct: 202-842-7800 Fax: 202-842-7899 Email: Michael G. Rhodes Cooley Godward Kronish LLP 4401 Eastgate Mall San Diego, CA 92121-1909 Direct: 858-550-6000 Fax: 858-550-6420 Email: Admitted Pro Hac Vice

Plaintiffs misstate the law by arguing that Congress did not enact Section 230 to foster e-commerce. Opposition, p. 24. As the Ninth Circuit recognized, “Congress wanted to . . . promote the development of e-commerce.” Batzel v. Smith, 333 F.3d 1018, 1027 (9th Cir. 2003) (emphasis added).


CERTIFICATE OF COMPLIANCE WITH RULE 15.8 Exclusive of the case caption, any table of contents, any table of authorities, and any required certificates of counsel or of a party, this brief contains less than 3,750 words. I understand that a material misrepresentation can result in the Court‟s striking the brief and imposing sanctions. If the Court so requests, I will provide an electronic version of the brief and/or a copy of the word or line print-out. This 17th day of June, 2008.

/s/ John H. Culver III John H. Culver III N.C. Bar No.: 17849 Hearst Tower, 47th Floor 214 North Tryon Street Charlotte, NC 28202 Phone: 704.331.7453 Fax 704.353.3153


CERTIFICATE OF SERVICE THIS IS TO CERTIFY that a copy of the foregoing REPLY IN SUPPORT OF DEFENDANT STUBHUB INC.‟S MOTION TO DISMISS AMENDED COMPLAINT has this day been duly served upon all other parties to this action by electronic mail and by placing a copy of same in the exclusive care and custody of the United States Postal Service with sufficient first class postage affixed thereto addressed as follows: Jeffrey K. Peraldo Kara W. Edmunds Jeffrey K. Peraldo, PA 500-D State Street Greensboro, NC 27405 Jeffrey E. Oleynik Charles E. Coble Benjamin R. Norman Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. 2000 Renaissance Plaza Post Office Box 26000 Greensboro, NC 27420

This 17th day of June, 2008. /s/ John H. Culver III John H. Culver III


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