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Google AdWords Plaintiffs Lose Class Cert. Bid (Law360)

By Erin Coe

A California federal judge on Thursday refused to certify a class action claiming Google Inc. charged for ads on unused and rarely visited websites through misleading contracts, finding that the plaintiffs failed to show that restitution could be calculated by methods of common proof.

U.S. District Judge Edward Davila held that the plaintiffs were unable to show that common issues predominated, holding that there was no systematic way to identify and exclude from the proposed class the advertisers who had no legal claims to restitution because they received direct economic benefits from ads placed on so-called parked domains and error pages.

The plaintiffs overlooked the reality of how advertising costs were determined in the AdWords system, and individualized issues of restitution permeated the class claims, according to the judge.

"Where, as here, proof of restitution due each class member cannot be proved with relative ease, the court finds good reason to deny class certification," the judge said.

The named plaintiffs, businesses and individuals who purchased Google ads filed suit in July 2008, alleging that the search engine company tricked them into paying for advertisements on error pages and parked domains while promising to place their ads on "high-quality" websites.

According to the suit, Google did not explain to its AdWords customers that the company would place their ads on low-quality "garbage sites" that contained only advertisements, or that contained advertisements plus links to additional pages of advertisements.

The third amended complaint, filed Nov. 29, 2010, alleges violations of California business law, including unfair conduct, unlawful conduct and fraudulent conduct.

The plaintiffs in March made a renewed motion for class certification based on the amended claims, seeking to certify a class of all advertisers who were charged by Google for clicks on advertisements that Google had placed on the low-quality pages between July 17, 2004, and March 31, 2008.

The judge held Thursday that the proposed class consisted of hundreds of thousands of AdWords customers who raised the same question over whether Google's alleged omissions were misleading to customers.

However, he found that the plaintiffs were unable to show that a common question of law or fact predominated, finding that the question of which advertisers among the hundreds of thousands of proposed class members were even entitled to restitution would require individual inquiries.

The court held that class members each paid different sums for each particular ad campaign and for each instance when an ad was clicked, pointing out that the amount advertisers pay to use AdWords is determined through an auction process that generates a separate cost for each advertiser for each ad and for each click, with specific amounts determined by the bidding strategies of the participating advertisers in a given auction.

"These intricacies make it more difficult to calculate what AdWords customers would have paid ‘but for' the alleged misstatements or omissions," the judge said.

In addition, under the AdWords auction system, there was no set price per click paid that was known ahead of time and paid by all advertisers. Instead, all advertisers paid a different price that was determined based on the bids from the advertisers participating in the auction, according to the judge.

"Any effort to determine what advertisers ‘would have paid' under a different set of circumstances requires a complex and highly individualized analysis of advertiser behavior for each particular ad that was placed," the judge said.

The court further explained that in many instances, individual proof would show that advertisers collected significant revenues and other benefits from ads placed on parked domains and error pages, and that those benefits would need to be individually accounted for in a restitution calculation.

In another portion of the order, the judge denied most of the plaintiffs' bid to strike declarations of three Google employees for allegedly containing expert opinions offered under the guise of lay witness testimony. While the court agreed to disregard part of one employee's declaration opining on the merits of the case, such as the viability of classwide restitution, it refused to strike down the entire declaration or the two other employees' declarations.

Attorneys representing the parties were not immediately available for comment.

The plaintiffs are represented by Schubert Jonckheer & Kolbe LLP, Foote Meyers Mielke & Flowers LLC, Chavez Law Firm PC, Law Office of Peter A. Lagorio, Gross Belsky Alonso LLP, the Kralowec Law Group, Kabateck Brown Kellner LLP, Saveri & Saveri Inc. and the Law Firm of Peter L. Currie PC.

Google is represented in this proceeding by Cooley LLP.

The case is In re: Google AdWords Litigation, case number 5:08-cv-03369, in the U.S. District Court for the Northern District of California.

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