Court Dismisses Reveal Chat Holdco’s Antitrust Lawsuit Against Facebook

On Monday, Judge Beth Labson Freeman of the Northern District of California issued an order granting Facebook Inc.’s motion to dismiss with prejudice the antitrust lawsuit brought against it filed by three web developers – Reveal Chat Holdco LLC, USA Technology and Management Services Inc., and Beehive Biometric – finding the plaintiffs’ claims time-barred.

Previously, the plaintiffs sued Facebook in January 2020 for antitrust violations alleging that it shut out the competition. Specifically, Facebook was sued for “removing access to a set of application programming interfaces (‘APIs’) in 2015 that Plaintiffs relied on for their mobile applications.” In June 2020, Facebook filed a reply to its motion to dismiss, after which, the court dismissed the suit with partial leave to amend. Facebook then moved to dismiss the first amended complaint, which the plaintiffs opposed.

Specifically, according to the order, the court previously found that the plaintiffs’ claims “were time-barred by the four-year statute of limitations for antitrust claims and that Plaintiffs had not adequately pled fraudulent concealment in part because they had not plausibly alleged they were without actual or constructive knowledge of the facts giving rise to their claims,” among other things, but granted them leave to amend for the issue of fraudulent concealment, which would toll the statute of limitations. Facebook filed another motion to dismiss the amended complaint, also asserting that the plaintiffs’ claims are time-barred.

In regards to the statute of limitations, Facebook argued that the plaintiffs’ claims are time-barred, as the court previously found, and that the plaintiffs’ amendments do not cure these deficiencies. As stated in the order, the plaintiffs argued that “there is an intra-circuit split as to whether a ‘discovery rule’ or an ‘injury rule’ applies to antitrust claims, and if this Court chooses the discovery rule, then Plaintiffs’ claims have not accrued.” However, the court disagreed with the plaintiffs, stating “the Supreme Court and Ninth Circuit have clearly stated that the injury rule applies to antitrust cases.” The court said the statute of limitations under the Sherman Act is four year. For the plaintiffs’ injunctive relief claims, the court reasserted that the doctrine of laches applies as does the four-year statute of limitations, adding that that the plaintiffs admitted that “they had notice of their injury by April 30, 2015 when the Core APIs that their businesses relied on were withdrawn.” However, the plaintiffs did not bring forth this lawsuit until January 16, 2020, thus, the plaintiffs’ claims are time-barred.

Nevertheless, the plaintiffs contended that “Facebook’s conduct restarted the statute of limitations under the ‘continuing violation’ doctrine.” Facebook argued that the plaintiffs failed to allege how they were injured beyond the initial withdrawal of the APIs, thus, there was no continuing violation; the court agreed with Facebook’s assertions that the continuing violation doctrine does not apply to toll the statute of limitations. As the plaintiffs have already had opportunities to amend, the court dismissed this claim with prejudice.

Turning to fraudulent concealment, the plaintiffs claimed that this doctrine tolls the statute of limitations because “Facebook had a duty to speak fully and truthfully about its plans for removing the APIs, and Facebook affirmatively lied about the real reasons for removing the APIs.” However, Facebook countered that the plaintiffs failed to remedy the deficiencies the court previously identified, that they did not plead that Facebook took affirmative acts to mislead or deceive them and that the plaintiffs knew about their injuries by April 2015, among other things.

The court cited Ninth Circuit case law stating that “if a plaintiff has actual or constructive knowledge of the facts giving rise to his claim, then fraudulent concealment does not apply.” In this action, the plaintiffs “do not attempt to contest that they knew of their alleged exclusion by Facebook by April 30, 2015, when Facebook removed access to Core APIs.” Instead, as the court reiterated, the plaintiffs claimed that “without the knowledge of Facebook’s true motives for removing the APIs, they could not know they were injured.” The court found that this injury – the loss of Core APIs – “was clear to Plaintiffs when it occurred.” The court also found that the plaintiffs “failed to plead affirmative conduct on the part of Facebook with the requisite particularity that Rule 9(b) requires.” Thus, the court concluded that the plaintiffs failed to adequately plead facts that they acted diligently to attempt to uncover facts giving rise to their claims.  

The court found that because the plaintiffs’ “entire theory of liability is based on completed acts by Facebook beyond the limitations period,” the statute of limitations period applies and the plaintiffs failed to adequately toll their claims. The court added that their claims are insufficient to meet Rule 9(b) standards. Thus, the court granted Facebook’s motion to dismiss with prejudice.

The plaintiffs are represented by Bathaee Dunne LLP. Facebook is represented by Wilmer Cutler Pickering Hale and Dorr LLP.