United States District Court, D. Kansas
MEMORANDUM AND ORDER
L. TEETER, UNITED STATES DISTRICT JUDGE
Steve Strauss filed this putative class action against
Defendant Angie's List, Inc. asserting violations of the
Lanham Act, 15 U.S.C. §§ 1501-114n (2012), and the
Kansas Consumer Protection Act (“KCPA”),
§§ 50-623 to -643 (West 2018). The claims hinge on
allegations Defendant routinely engages in false advertising
and deceptive trade practices through statements published on
its website and other forms of media. Before the Court are:
(1) Defendant's motion seeking dismissal of
Plaintiff's Class Action Complaint (“Original
Complaint”) for failure to state a claim under Federal
Rule of Civil Procedure 12(b)(6); and (2) Plaintiff
Strauss's request for leave to file a First Amended Class
Action Complaint (“Amended Complaint”). Docs. 11,
vast majority of Plaintiff Strauss's Lanham Act and KCPA
claims are time-barred. Those that are not time-barred fail
to satisfy at least one essential element of each claim. For
these reasons, Plaintiff Strauss's well-pleaded
allegations do not plausibly give rise to an entitlement to
relief under the Lanham Act or KCPA and Defendant's
motion to dismiss (Doc. 11) is granted. The Amended Complaint
does not remedy the Original Complaint's shortcomings and
Plaintiff Strauss's motion to amend (Doc. 43) is,
therefore, denied. If permitted, Plaintiff Strauss's
claims under the Amended Complaint would still be subject to
immediate dismissal. The only remaining claims would then be
those of David Garner, the additional plaintiff sought to be
added through the Amended Complaint
(“Proposed-Plaintiff Garner”). Because the Court
could not exercise personal jurisdiction over Defendant
absent Plaintiff Strauss, the Amended Complaint is futile in
its entirety. The Court's analysis of and conclusions
regarding Defendant's motion to dismiss and Plaintiff
Strauss's request for leave to amend are discussed at
Strauss filed his Original Complaint on September 22, 2017,
asserting: (1) false advertising claims under section 43(a)
of the Lanham Act; and (2) unfair, deceptive, or
unconscionable practices claims under sections 4 and 5 of
KCPA. Doc. 1 ¶¶ 75-87; see also 15 U.S.C.
§ 1125 (2012); K.S.A. §§ 50-626, -627 (West
2018). He also seeks class certification of nationwide
(Lanham Act) and Kansas-based (KCPA) claims. The Original
Complaint contains seventy-four paragraphs of factual
allegations-several of which include multiple
subparagraphs-exclusive of the counts alleged and prayers for
relief. Id. ¶¶ 1-75.
November 20, 2017, Defendant moved to dismiss the Original
Complaint under Rule 12(b)(6) on numerous grounds, including
laches (Lanham Act claims), statute of limitations (KCPA
claims), failure to plead with sufficient particularity as
required by Rule 9(b) (Lanham Act and KCPA claims), and
failure to plausibly plead one or more essential elements of
the claim (Lanham Act and KCPA claims). Doc. 11 at 1-2; Doc.
12 at 9-27. Defendant's supporting memorandum is
twenty-seven pages. Doc. 12 at 1-27. Plaintiff Strauss
responded to the numerous issues raised in Defendant's
motion to dismiss on December 26, 2017, in a fifty-four-page
brief. Doc. 23 at 1-54. Defendant then filed its reply in a
twenty-three-page brief on January 19, 2018. Doc. 25 at 1-23.
two months after Defendant's motion to dismiss was fully
briefed, on March 12, 2018, Plaintiff Strauss sought leave to
amend his Original Complaint for purposes of joining
Proposed-Plaintiff Garner. Doc. 43 at 1, 9. Plaintiff
Strauss's Amended Complaint is nearly identical to his
Original Complaint, save the specific factual allegations
concerning Proposed-Plaintiff Garner's personal
experience with Defendant and the addition of an individual
claim on Proposed-Plaintiff Garner's behalf for unfair,
deceptive, or unconscionable acts or practices under the
Maryland Consumer Protection Act (“MCPA”), Md.
Code Ann. §§ 13-301 to -408 (West 2018). Doc. 43-1
¶¶ 56-74, 109-115. The Amended Complaint does not
alter any allegations against Defendant with respect to
Plaintiff Strauss. Compare Doc. 1, with Doc. 43-1;
see also Doc. 43 ¶¶ 41-43 (identifying
Proposed-Plaintiff Garner's individual MCPA claim as the
only new claim in the Amended Complaint). Defendant opposed
Plaintiff Strauss's request to amend on April 11, 2018,
in a twenty-seven-page brief, arguing largely that the
amendment did not address the shortcomings of the Original
Complaint and would therefore be futile as to Plaintiff
Strauss, and that the Court would then lack jurisdiction over
the only remaining plaintiff, Proposed-Plaintiff Garner. Doc.
47 at 9-14. Plaintiff Strauss filed his
thirty-two-page reply on April 27, 2018. Doc. 50.
total, exclusive of tables of contents and authorities, the
parties submitted over 270 pages for the Court's
consideration in ruling on the pending motions. Docs. 1,
11-12, 23, 25, 43, 47, 50. The briefs raise numerous legal
issues irrelevant to the Court's disposition of
Defendant's motion to dismiss and Plaintiff Strauss's
request for leave to amend. The factual allegations are also
voluminous, and many are immaterial to the Court's
ultimate legal conclusions. Those allegations that are
relevant to the Court's ruling on the pending motions are
collected and distilled below.
following facts are taken from the well-pleaded allegations
of the Original Complaint and, consistent with the
well-established standards for evaluating motions to dismiss
under Rule 12(b)(6), the Court assumes the truth of these
facts for purposes of analyzing Defendant's motion to
dismiss. Facts unique to the Amended Complaint but necessary
to the Court's consideration of Plaintiff Strauss's
request for leave to amend are identified as such.
Defendant's General Business Practices
is a corporation organized under Delaware state law. Doc.
¶ 2. It has its principal place of business in
Indianapolis, Indiana, and is licensed to conduct business in
Kansas. Id. Defendant, in fact, conducts business in
Kansas. Id. Since its establishment in 1995,
Defendant has become one of the leading internet-based
consumer ratings services. Id. ¶¶ 6, 13.
It primarily serves consumers through its website,
which it markets as a forum for the viewing and posting of
first-hand, consumer-generated reviews of service providers.
Id. At its most basic level, Defendant's website
functions as a search engine. Id. ¶¶ 15,
18-22. A consumer in need of goods or services can search
Defendant's website and rely on the actual experience of
other consumers- displayed on the website through a
letter-grade rating and narrative reviews-to identify the
service provider best suited to assist with the
consumer's needs. Id. ¶¶ 6, 13, 15,
are led to believe that a search of Defendant's website
will return a list of potential service providers, in ranked
order, based on the first-hand experience of other consumers.
Id. ¶¶ 6-7, 10-11, 13, 15, 17-22. But the
order in which Defendant displays service providers within
search results is not based solely on consumer-generated
ratings and reviews. Id. ¶¶ 8-9, 12, 15,
23-25. Defendant also receives substantial revenue from
providing advertising services to service providers who
appear on its website. Id. ¶¶ 6, 14,
61-64. And whether a service provider pays Defendant to
advertise directly affects its position within search
results. Id. ¶¶ 8-9, 12, 15, 23-25, 62-63.
An advertising (i.e., fee-paying) service provider is listed
at the top of search results and may be listed above a
non-advertising (i.e., non-fee-paying) service provider-even
if the non-advertising service provider has a higher rating
and better reviews. Id. But Defendant does not make
this clear to consumers. Id.
general advertising misleads consumers. Id.
¶¶ 11, 18. Through advertising and promotion of its
business, Defendant represents to consumers that
“[c]ompanies cannot pay to be on [Defendant's
website]” and that service providers “don't
pay” to be on Defendant's website. Id.
¶¶ 11(a)-(b). Defendant touts itself as a business
driven by a “consumer first philosophy” and an
“unwavering commitment” to place “the
interests of the consumer first.” Id. ¶
11(c). It advertises its website as the place where consumers
can find the service provider best suited to satisfy their
Defendant's Membership Agreement, which fee-paying
consumers must sign to access the full benefits of
Defendant's website, Defendant states that the ratings
and reviews displayed on Defendant's website are
“based upon the actual first-hand experiences
[consumers] have had with [service providers].”
Id. ¶ 17. Defendant's website FAQs also
state that a service provider's position in search
results is determined by their recent grades and number of
reviews and companies with the best ratings will appear
first. Id. ¶ 21. Companies with a poor rating
will appear lower on the list after businesses who have
earned good ratings for superior work. Id. ¶
reality, search list order or ranking is not based purely on
consumer ratings and reviews. Id. ¶¶ 8-9,
12, 15, 23-25, 62-63. Service providers can artificially
manipulate where they appear in search results by paying to
advertise with Defendant. Id. Defendant's
marketing materials directed to service providers reflect
this disparity. Id. ¶¶ 12, 24, 62. Service
providers are clearly told that advertising on
Defendant's website “exponentially increases
[their] exposure to [consumers] . . . .” Id.
¶ 24(a). More specifically, Defendant markets premium
advertising options that allow service providers to
“[a]ppear on the first page of search results so
members can easily find and access [their] review[s].”
Id. ¶ 24(c).
Plaintiff Strauss's Relationship and Experience with
Plaintiff Strauss is a Kansas resident. Id. ¶
1. He is the sole proprietor of a tree removal,
trimming, pruning, and stump grinding business. Id.
¶ 31. Plaintiff Strauss is an example of the type of
service provider commonly listed on Defendant's website.
Id. ¶¶ 6, 31, 33. Since 2005, Plaintiff
Strauss has been aware of Defendant's advertising
services and his ability to affect his ranking in search
results on Defendant's website if he paid for such
services. Id. ¶¶ 33, 35. Plaintiff Strauss
and Defendant entered into advertising agreements each year
between 2005 and 2016. Id. ¶ 34. During this
time, Plaintiff Strauss paid Defendant more than $200, 000.00
in advertising fees and coupon retention percentages in an
effort to appear higher in search results for arborists and
tree removal or tree care businesses on Defendant's
website. Id. ¶¶ 33-34.
2013, Plaintiff Strauss and Defendant had an amicable
relationship, particularly during the fall and winter of
2011, when Plaintiff Strauss advertised under Defendant's
Big Deal Coupon program. Id. ¶¶ 33-47.
This program was particularly appealing to Defendant, who
shared in 25% of the gross revenues Plaintiff Strauss
received for each Big Deal Coupon redeemed by a consumer.
Id. ¶¶ 35-38. In 2012, however, Plaintiff
Strauss discontinued advertising the Big Deal Coupon, and its
relationship with Defendant began to sour. Id.
¶¶ 39-41. For a period of three months in late
2013, Plaintiff Strauss was completely excluded from search
results on Defendant's website-purportedly due to a
criminal background check that revealed a misdemeanor, which
was later deemed to be an error. Id. ¶¶
41-45. Plaintiff Strauss ultimately engaged legal counsel to
resolve the dispute, Defendant offered an apology, and
Plaintiff Strauss began to reappear in search results.
Id. ¶ 46. During the three-month intervening
period, however, it was conveyed to consumers through a
message on Defendant's website that Plaintiff Strauss
either had not met the requisite qualifications to appear on
Defendant's website or had “no ratings or
reviews.” Id. ¶ 42. From 2013 to 2016,
Plaintiff Strauss appeared in search results, but Defendant
intentionally “buried” Plaintiff Strauss within
the list despite Plaintiff Strauss having received numerous
favorable consumer-generated ratings and reviews.
Id. ¶¶ 48-49. In the fall of 2016,
Defendant failed to honor its obligations to Plaintiff
Strauss under their most recent advertising agreement.
Id. ¶ 50. Since 2016, Plaintiff Strauss has not
advertised on Defendant's website. Id. ¶
has falsely described, disparaged, and defamed Plaintiff
Strauss and his business and services by declaring to
consumers who search Defendant's website that: (1)
Plaintiff Strauss has “no rating or [consumer]
reviews”; (2) has not met certain
“criteria” to be listed on Defendant's
website; and (3) has no “local offers” to extend
to consumers. Id. ¶ 52. In reality,
Plaintiff Strauss has many favorable ratings and reviews, has
more than satisfied Defendant's published criteria for
being listed on Defendant's website, and has several
local offers to extend consumers. Id.
Proposed-Plaintiff Garner's Relationship and Experience
with Defendant 
Garner is a resident of Maryland. Doc. 43-1 ¶ 2. He is
the sole proprietor of a roofing, siding, and guttering
business in Maryland, doing business as Garner Roofing
Company, LLC (“Garner Roofing”). Id.
¶¶ 2, 56. Garner Roofing is another example of the
type of service provider commonly listed in search results on
Defendant's website. Id. ¶¶ 8, 56.
Since 2012, Proposed-Plaintiff Garner has been aware of
Defendant's advertising services. Id. ¶ 57.
Between 2012 and 2017, Proposed-Plaintiff Garner and
Defendant entered into advertising agreements. Id.
From 2012 to 2014, Proposed-Plaintiff Garner and Defendant
had an amicable relationship and, each year during that time,
Proposed-Plaintiff Garner was awarded a Super Service Award
by Defendant for achieving and maintaining “a superior
rating” on Defendant's website. Id.
January 2018, Proposed-Plaintiff Garner notified Defendant he
did not intend to utilize Defendant's advertising
services after that date. Id. ¶¶ 60-62.
Defendant attempted to persuade Proposed-Plaintiff Garner to
change his mind, but he declined. Id. ¶¶
63-66. Despite Proposed-Plaintiff Garner's
immediately-effective notice of cancelation, Defendant
continued to charge him for advertising services during the
nine-day period that Defendant attempted to persuade
Proposed-Plaintiff Garner to change his mind and an
additional six-day period Defendant attributed to a
processing delay. Id. ¶¶ 67-72.
Proposed-Plaintiff Garner disputed the additional charge,
refusing to pay for services subsequent to his first notice
of cancellation, but Defendant insisted he was responsible
for the cost of additional advertising during that time
period. Id. ¶¶ 70-72. Defendant also
notified Proposed-Plaintiff Garner that, as a result of the
dispute and his refusal to pay, it had appended a
“Non-Pay Exclusion” to his business profile on
Defendant's website, informing consumers that
Proposed-Plaintiff Garner owed Defendant unpaid sums of
money. Id. ¶ 73. Defendant also allowed a
single consumer to submit a duplicative negative review of
Proposed-Plaintiff Garner, assigning him the lowest possible
rating, and removed from its website all references to
Proposed-Plaintiff Garner's previously-earned Super
Service Awards. Id. ¶ 74.
Defendant's Revenue Derived from Advertising
Defendant derives most of its revenue from advertising
(fee-paying) service providers. Id. ¶ 61.
“In 2011, 2012, 2013, and 2014, Defendant derived 62%,
69%, 73%, and 76.8% of its total revenue, respectively, not
from its consumers/members but from [advertising (fee-paying)
service providers].” Id. For example, in 2014,
Defendant made approximately $241, 900, 000.00 from
agreements with advertising (fee-paying) service
providers-more than three times its revenue derived from
consumer membership fees. Id. “Recognizing
this, in June of 2016, [Defendant] instituted a
‘freemium' model, offering a bare-bones free
membership [to consumers]” in addition to its
“Silver” and “Gold” plans.
Id. “This new course of business provided even
further incentive [for Defendant] to extract more advertising
revenue from service providers to compensate for the loss of
[fee-paying consumers].” Id. Defendant's
“economic fortunes are aligned far more with [s]ervice
[p]roviders than consumers.” Id.
MOTION TO DISMISS
seeks dismissal of Plaintiff Strauss's Lanham Act and
KCPA claims in the Original Complaint on several grounds.
Relevant to the Court's ruling are three of
Defendant's contentions. First, Defendant asserts that
Plaintiff Strauss cannot establish at least one essential
element of his Lanham Act false advertising claim because the
representations on which Plaintiff Strauss's claims are
based do not constitute “commercial advertising or
promotion.” Second, Defendant asserts that Plaintiff
Strauss cannot establish his KCPA claims because he has not
plausibly pled the essential elements of reliance or
causation. Third, Defendant asserts as an affirmative defense
that Plaintiff Strauss's Lanham Act and KCPA claims are
all time-barred- the Lanham Act claims by the doctrine of
laches and the KCPA claims by the applicable statute of
limitations. Because the Court concludes that the vast
majority of Plaintiff Strauss's claims are barred by
either laches or the applicable statute of limitations, the
Court addresses these issues first. The Court then considers
Defendant's request to dismiss Plaintiff Strauss's
remaining claims-i.e., his remaining timely claims-for
failure to plausibly plead at least one essential element of
Standard of Review
Rule 12(b)(6), to survive a motion to dismiss, “a
complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on
its face.'” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). The plaintiff's claim is
facially plausible if he pleads sufficient factual content to
allow the Court “to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Id. The plausibility standard requires “more
than a sheer possibility that a defendant has acted
unlawfully” but “is not akin to a
‘probability requirement.'” Id.
“Where a complaint pleads facts that are ‘merely
consistent with' a defendant's liability, it
‘stops short of the line between possibility and
plausibility of entitlement to relief.'”
Id. (quoting Twombly, 550 U.S. at 557).
standard results in two principles that underlie a
court's analysis. Id. First, “the tenet
that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal
conclusions.” Stated differently, though the court must
accept well-pleaded factual allegations as true, it is
“not bound to accept as true a legal conclusion couched
as a factual allegation.” Twombly, 550 U.S. at
555 (internal citations and quotations omitted).
“Second, only a complaint that states a plausible claim
for relief survives a motion to dismiss.”
Iqbal, 556 U.S. at 679. “[W]here the
well-pleaded facts do not permit the court to infer more than
the mere possibility of misconduct, the complaint has
alleged-but it has not ‘shown'-‘that the
pleader is entitled to relief.'” Id.
(quoting Fed.R.Civ.P. 8(a)(2) (original brackets omitted)).
“In keeping with these [two] principles, a court
considering a motion to dismiss can choose to begin by
identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of
truth.” Id. “When there are well-pleaded
factual allegations, a court should assume their veracity and
then determine whether they plausibly give rise to an
entitlement to relief.” Id.
Affirmative Defenses of Laches and Statute of
contends Plaintiff Strauss's Lanham Act and KCPA claims
under the Original Complaint are time-barred-the Lanham Act
claims under a laches theory and the KCPA claims by the
applicable statute of limitations. Doc. 12 at 19-20, 26-27.
Both laches and statute of limitations are affirmative
defenses; however, when the factual allegations and dates
alleged in the complaint “make clear that the right
sued upon has been extinguished, this issue may be resolved
on a motion to dismiss.” Thompson v. Jiffy Lube
Int'l, Inc., 505 F.Supp.2d 907, 924 (D. Kan. 2007);
see also Dummar v. Lummis, 543 F.3d 614, 619 (10th
Cir. 2008) (restating holding from Jiffy Lube);
United States v. Rodriguez-Auirre, 264 F.3d 1195,
(10th Cir. 2001) (considering both laches and statute of
limitations defenses at motion to dismiss phase). The Court,
in large part, agrees with Defendant. The vast majority of
Plaintiff Strauss's Lanham Act and KCPA claims are
Plaintiff Strauss's Lanham Act Claims
of the Original Complaint alleges Defendant engaged in false
advertising in violation of section 43(a) of the Lanham Act.
Doc. 1 at 32-33. Section 43(a) imposes liability against any
individual or entity who “in commercial advertising or
promotion, misrepresents the nature, characteristics,
qualities, or geographical origin of his or her or another
person's goods, services, or commercial
activities.” 15 U.S.C. § 1125(a)(1)(B) (2012). The
Lanham Act does not contain a statute of limitations, but it
“expressly provides for defensive use of
‘equitable principles, including laches.'”
Petrella v. Metro-Goldwin-Mayer, Inc. 572 U.S. 663,
n.15, ___ 134 S.Ct. 1962, 1979 n.15 (2014) (quoting 15 U.S.C.
§ 1115(b)(9) (2012)). This includes Lanham Act claims
for false advertising under section 43(a). See,
e.g., Hot Wax, Inc. v. Turtle Wax, Inc., 191
F.3d 813, 827 (7th Cir. 1999) (affirming dismissal of Lanham
Act false advertising claims on grounds of laches);
Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 194
(2d Cir. 1996) (same).
to a statute of limitations, laches functions as a temporal
limitation on a party's right to sue. Biodiversity
Conservation All. v. Jiron, 762 F.3d 1036, 1090 (10th
Cir. 2014). “It stems from the principle that
‘equity aids the vigilant and not those who slumber on
their rights.'” Id. at 1090-91 (quoting
Kansas v. Colorado, 514 U.S. 673, 687 (1995)).
“Laches bars a claim when there is: (1) lack of
diligence by the [plaintiff], and (2) prejudice to the
[defendant].” Id. at 1091 (internal quotations
and citations omitted). Although it is a separate defense,
the determination of whether laches applies is made with
reference to the most analogous state statute of limitations.
Yeager v. Fort Knox Security Prods., 602 Fed.Appx.
423, 431 (10th Cir. 2015); see also Santana Prod., Inc.
v. Bobrick Washroom Equip., Inc., 401 F.3d 123, 135 (3d
Cir. 2005) (“Courts commonly use the appropriate
statute of limitations as a guideline in claims for false
advertising under § 43(a) of the Lanham Act.”);
Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304
F.3d 829, 835 (9th Cir. 2002) (stating laches determination
is made with reference to analogous state statute of
limitations period). In dealing with Lanham Act claims,
courts have applied a “strong presumption . . . that if
a § 43(a) claim is filed within the analogous state
limitations period, . . . laches is inapplicable; if the
claim is filed after the analogous limitations period has
expired, the presumption is that laches is a bar to
suit.” Jarrow Formulas, 304 F.3d at 837;
see also Lyons P'ship, L.P. v. Morris
Costumes, Inc., 243 F.3d 789, 799 (4th Cir. 2001);
Kason Indus., Inc. v. Component Hardware Grp., Inc.,
120 F.3d 1199, 1203 (11th Cir. 1997); Hot Wax, 191
F.3d at 821; Conopco, 95 F.3d at 191; Tandy
Corp. v. Malone & Hyde, Inc., 769 F.2d 362, 365-66
(6th Cir. 1985); Univ. of Pittsburgh v. Champion Prods.
Inc., 686 F.2d 1040, 1045 (3d Cir. 1982).
light of the above, to determine whether laches applies to
bar Plaintiff Strauss's Lanham Act claims, the Court
must: (1) identify the most analogous state statute of
limitations; (2) determine whether Plaintiff Strauss's
Lanham Act claims were filed before or after the expiration
of the applicable limitations period; (3) determine whether a
presumption in favor of or against application of laches
exists; and (4) in light of the presumption or lack thereof,
determine whether there was a lack of diligence by Plaintiff
Strauss in filing suit that has resulted in prejudice to
Defendant. Each of these issues is addressed in turn below.
Determination of the Analogous State ...