1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA

6

7 STACKLA, INC., et al., Case No. 19-cv-05849-PJH 8 Plaintiffs,

9 v. ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ODER 10 FACEBOOK INC., et al., Re: Dkt. No. 3 11 Defendants. 12

13 14 Plaintiffs Stackla, Inc., Stackla, Ltd., and Stackla Pty Ltd.’s (together, “Stackla”) 15 motion for a temporary restraining order came on for hearing before this court on 16 September 25, 2019. Dkt. 3. Plaintiffs appeared through their counsel, Jeffrey Tsai and 17 Isabelle Ord. Defendants Facebook Inc. and Instagram, LLC (together, “Facebook”) 18 appeared through their counsel, Sonal Mehta and Matthew Benedetto. Having read the 19 papers filed by the parties and carefully considered their arguments and the relevant 20 legal authority, and good cause appearing, the court hereby DENIES the motion, for the 21 following reasons. 22 BACKGROUND 23 On September 19, 2019, Stackla filed the complaint originating this action against 24 defendants. The complaint asserts nine causes of action: (1) Declaratory Judgment 25 Under

, that Plaintiffs Have Not Violated the Computer Fraud and Abuse 26 Act (

); (2) Declaratory Judgment Under

, that Plaintiffs 27 Have Not Violated

(c); (3) Intentional Interference with Contract; 1 (

, et seq.); (6) Promissory Estoppel; (7) Breach of 2 Contract; (8) Breach of Contract; and (9) Breach of the Implied Covenant of Good Faith 3 and Fair Dealing. Compl., Dkt. 1. 4 Stackla operates a software-as-a-service business and sells annual cloud software 5 subscriptions to clients. Compl. ¶ 23. Its service helps clients find content published to 6 social media platforms such as Facebook, Twitter, YouTube, and Instagram, gain 7 approval to use the content, and then re-purpose it in their own advertising and marketing 8 activities. Mahoney Decl. ¶ 5, Dkt. 3-10. 9 Facebook is a large social-media company and platform, and Instagram is itself a 10 large social-media platform wholly owned by Facebook. Compl. ¶¶ 12–14. 11 Stackla formerly used the Facebook Open Graph Application Programming 12 Interface (“API”), which is developed and offered by Facebook to certain third-party 13 application developers to more easily access data hosted by Facebook. Stackla would 14 use Facebook’s API to identify content uploaded by Facebook users for its clients to use 15 in their advertising materials. 16 Stackla argues that its business requires access to Facebook’s platforms, because 17 “virtually all of Stackla’s clients are heavily and almost exclusively reliant on Facebook 18 and Instagram content to derive value from Stackla’s platform.” Mot. at 3, Dkt. 3. 19 Approximately 80 percent of the content collected by Stackla’s clients comes from 20 postings on Facebook and Instagram. Mahoney Decl. ¶ 13; Compl. ¶ 57. 21 On May 25, 2019, Facebook accepted Stackla into the Facebook Marketing 22 Partner program, and Stackla was presented as an official partner of Facebook on May 23 29, 2019. Mahoney Decl. ¶ 19. 24 In 2015, The Guardian broke a now-famous story involving Cambridge Analytica’s 25 misuse of Facebook data. Tsai Decl., Dkt. 3-1, Ex. E. The Federal Trade Commission 26 later opened an investigation into whether Facebook had violated a prior settlement 27 relating to Facebook user protections.

Ex. G. Facebook has been under public 1 its practices to ensure that the data it has, and the social networking interactions 2 undertaken on its systems, are properly policed and not abused. 3 Around August 7, 2019, Business Insider published an article asserting that 4 Instagram had allowed a third-party advertising user to misuse the platform to advance 5 advertising and/or third party consumer-tracking purposes. See Mahoney Decl. ¶ 24. A 6 subsequent article named Stackla as an offending third-party advertiser. Mahoney Decl. 7 ¶ 25. Stackla denies the truth of the article. 8 On August 30, 2019, Stackla received a “Cease and Desist Abuse of Facebook” 9 letter from Facebook. Mahoney Decl. ¶ 29; Compl. ¶ 49. The letter stated, among other 10 things, that Stackla had breached a Master Subscription Agreement between it and 11 Facebook and that Stackla was suspended as a marketing partner. See Compl. ¶ 51. 12 The letter informed Stackla that it was no longer permitted to access Facebook’s or 13 Instagram’s computer systems. The same day, Stackla’s access to Facebook’s API was 14 terminated. Mahoney Decl. ¶ 30. The Facebook and Instagram accounts of Stackla 15 officers were also terminated, and a number of Stackla’s current and former employees 16 were also barred access.

17 The parties have corresponded since August 30, but Facebook’s denial of access 18 to its systems remains in effect. 19 On September 19, 2019, plaintiffs filed this suit and the present motion for a 20 temporary restraining order. 21 DISCUSSION 22 A. Legal Standard 23 Federal Rule of Civil Procedure 65 provides federal courts with the authority to 24 issue temporary restraining orders and preliminary injunctions. Fed. R. Civ. P. 65(a)–(b). 25 Generally, the purpose of a preliminary injunction is to preserve the status quo and the 26 rights of the parties until a final judgment on the merits can be rendered (see U.S. Philips 27 Corp. v. KBC Bank N.V.,

(9th Cir. 2010)), while the purpose of a 1 hearing may be held (see Granny Goose Foods, Inc. v. Bhd. of Teamsters and Auto 2 Truck Drivers,

(1974)). 3 Requests for temporary restraining orders are governed by the same legal 4 standards that govern the issuance of a preliminary injunction. See Stuhlbarg Int'l Sales 5 Co., Inc. v. John D. Brush & Co., Inc.,

, 839 n.7 (9th Cir. 2001). 6 An injunction is a matter of equitable discretion and is “an extraordinary remedy 7 that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” 8 Winter v. Natural Res. Def. Council, Inc.,

(2008); see also Munaf v. Geren, 9

, 689–90 (2008). A preliminary injunction “should not be granted unless the 10 movant, by a clear showing, carries the burden of persuasion.” Mazurek v. Armstrong, 11

(1997) (per curiam). 12 “A plaintiff seeking a preliminary injunction must establish that [1] he is likely to 13 succeed on the merits, that [2] he is likely to suffer irreparable harm in the absence of 14 preliminary relief, that [3] the balance of equities tips in his favor, and that [4] an 15 injunction is in the public interest.” Winter,

. 16 Alternatively, “‘serious questions going to the merits’ and a hardship balance that 17 tips sharply toward the plaintiff can support issuance of an injunction, assuming the other 18 two elements of the Winter test are also met.” All. for the Wild Rockies v. Cottrell, 632

, 1132 (9th Cir. 2011). “That is, ‘serious questions going to the merits’ and a 20 balance of hardships that tips sharply towards the plaintiff can support issuance of a 21 preliminary injunction, so long as the plaintiff also shows that there is a likelihood of 22 irreparable injury and that the injunction is in the public interest.”

; see also 23 Disney Enterprises, Inc. v. VidAngel, Inc.,

(9th Cir. 2017). 24 B. Analysis 25 Under the both the Winter and Alliance for the Wild Rockies tests, plaintiffs must 26 demonstrate (1) they are likely to suffer irreparable harm in the absence of the requested 27 relief, and (2) an injunction is in the public interest. Plaintiffs do not satisfy either of these 1 plaintiffs must satisfy each of the four factors, the court need not address the balance of 2 hardships or whether plaintiffs have raised serious questions going to the merits. See All. 3 for the Wild Rockies, 865 at 1223 (“Because a party seeking a preliminary injunction must 4 satisfy all four factors under both the Winter and ‘sliding scale’ standards for injunctive 5 relief, we need not address the remaining three factors.”) (citation omitted); Disney 6 Enterprises, Inc.,

(“Likelihood of success on the merits ‘is the most 7 important’ Winter factor; if a movant fails to meet this ‘threshold inquiry,’ the court need 8 not consider the other factors”). 9 1. Irreparable Harm 10 Plaintiffs argue they will be irreparably harmed absent an injunction because 11 “Stackla’s business will be irretrievably destroyed before any hearing can take place and 12 any relief on the merits will be too late to save Stackla.” Mot. at 9. 13 Although “[m]onetary damages are not usually sufficient to establish 14 irreparable harm[,] . . . . [t]he threat of being driven out of business is sufficient to 15 establish irreparable harm.” Am. Passage Media Corp. v. Cass Commc'ns, Inc., 750

, 1473–74 (9th Cir. 1985). “A plaintiff must do more than merely allege 17 imminent harm sufficient to establish standing; a plaintiff must demonstrate immediate 18 threatened injury as a prerequisite to preliminary injunctive relief.” Caribbean Marine 19 Servs. Co. v. Baldrige,

, 674 (9th Cir. 1988). “Speculative injury cannot be 20 the basis for a finding of irreparable harm.” In re Excel Innovations, Inc.,

, 21 1098 (9th Cir. 2007). 22 The court first notes that plaintiffs’ motion seeks a temporary restraining order, the 23 purpose of which is to address only harms caused by actions likely to occur between the 24 time of its filing and a preliminary injunction hearing. For that reason, plaintiffs’ argument 25 that “relief on the merits will be too late” misses the mark. Arguments regarding harm 26 plaintiffs are likely to suffer caused by conduct occurring after a preliminary injunction 27 hearing and before a final judgment on the merits are cognizable on a motion for 1 Plaintiffs support their arguments of irreparable harm primarily with a declaration 2 from Damien William Mahoney, the Chief Executive Officer, director, and shareholder of 3 one of the plaintiff entities, Stackla Pty. Ltd.1 Mahoney Decl. ¶ 1. The company he is 4 CEO and director of, Stackla Pty. Ltd., is the parent company and sole owner of the other 5 two plaintiff entities.

Mahoney elsewhere avers that he is also CEO of the other two 6 plaintiff entities. Id. ¶¶ 1, 3. 7 Preliminarily, plaintiffs’ allegations of imminent harms share a common fatal flaw in 8 that they merely allege speculative harm—they do not sufficiently demonstrate that it is 9 likely to occur. Mahoney’s declaration—the sole source cited to support plaintiffs’ 10 arguments for irreparable harm—is too speculative to constitute a basis for the 11 extraordinary relief plaintiffs seek. 12 Mahoney attests to four broad points supporting the imminent harm plaintiffs 13 allegedly face. 14 First, he declares that “virtually all” of plaintiffs’ clients “heavily” rely on Facebook’s 15 platforms when using Stackla’s products. Mahoney Decl. ¶¶ 5 (“[t]he vast majority of the 16 content Stackla relies on for its business, however, comes from Facebook and 17 Instagram”), 15 (“virtually all of Stackla’s clients are heavily and almost exclusively reliant 18 on Facebook and Instagram content to derive value from Stackla’s platform”), 36 19 (“Facebook and Instagram user content sourced through Stackla is over 80% of the 20 content curated by Stackla’s clients through Stackla’s platform.”). 21 Stackla has sufficiently established for purposes of this motion that much— 22 although admittedly not all—of the work it conducted for clients prior to August 30, 2019 23 involved accessing Facebook’s platforms. 24 Second, Mahoney declares that if Stackla is unable to access Facebook, its 25 current clients will terminate their existing agreements. Mahoney Decl. ¶¶ 15 (“If Stackla 26

27 1 The court declines to consider plaintiffs’ untimely filings, submitted on the literal eve of 1 does not have access to Facebook and Instagram content, Stackla’s clients will not use 2 Stackla.”), 31 (“to date, Stackla has received over 100 notices from its clients claiming a 3 material breach of its agreement with our clients”), 36 (“[w]ithout injunctive relief, Stackla 4 cannot deliver contractually promised services to its clients and will be forced to terminate 5 its client agreements if Stackla’s clients do not cancel the agreements first. As of the 6 date of this declaration, a majority of Stackla’s customers have already raised their 7 concerns regarding lack of access and Stackla’s breach. If Stackla is not able to cure the 8 breaches and alleviate concern, Stackla’s customer contracts will be terminated.”), 38 9 (“Among Stackla’s clients, those who have not already given notice of material breaches 10 are asking what recourse they have to cancel contracts and receive refunds for license 11 fees.”). 12 Stackla’s strongest argument here would be that it is in material breach of 13 contractual obligations as a result of Facebook’s ban, and its clients have confirmed that 14 they will imminently be rightfully withdrawing from their agreements, resulting in a loss of 15 revenue and client relationships. But, even charitably construed, Stackla merely alleges 16 those conclusions—it does not demonstrate them. For example, Stackla does not 17 identify a single client that it will imminently lose (or even an exemplary client it has 18 already lost), it does not submit a copy of any contract it will breach (or even identify any 19 exemplary contractual term it will breach), and it does not identify any clients who will 20 imminently give notice of material breach (or even an exemplary client of the 100 who 21 have already given such notice). Moreover, the fact that customers have “raised . . . 22 concerns” and “are asking what recourse they have” does not demonstrate a likelihood 23 that they will cease paying Stackla under the terms of their contracts—much less that 24 they will do so imminently. Stackla asks the court to accept as true an allegation that its 25 inability to access Facebook’s platform constitutes the material breach of numerous 26 contracts, and then to speculate that clients expressing concern and asking about 27 Facebook will imminently terminate their relationships with plaintiffs—all before a 1 events are likely to transpire. 2 Third, Mahoney declares that if Stackla is unable to access Facebook, it will lose 3 prospective clients it would otherwise contract with. Id. ¶ 38 (“Prospective clients are 4 now questioning their decision to select Stackla and instead choosing its competitors.”). 5 Although it is possible this is true, Stackla has failed to demonstrate its likelihood. 6 Mahoney has not identified prospective customers who have withdrawn from ongoing 7 sales activities. Moreover, Stackla merely alleges but does not demonstrate that 8 Facebook’s ban caused this alleged harm (rather than, for example, prior negative media 9 attention), or that the injunctive relief it seeks would be effective in curing it. 10 Fourth, Mahoney declares that if Stackla is unable to access Facebook, it will 11 “soon” cease to be a going concern. Id. ¶¶ 37 (“Stackla relies on receivables from its 12 clients to fund its operations, which are dependent on customers using the Stackla 13 platform to source and acquire content. . . . Without continued access to Facebook and 14 Instagram, Stackla will be deprived of its revenue.”), 38 (“Stackla is losing business every 15 day in which access to Facebook and Instagram is shut off, and this will soon reach a 16 tipping point where Stackla can no longer operate.”). 17 Even if the court found that plaintiffs had adequately demonstrated the likelihood 18 of the above harms, that Stackla will lose existing clients and fail to attract new clients 19 due to Facebook’s ban, Stackla’s request for emergency relief would have to be denied 20 because it has failed to demonstrate that those harms would lead to the irreparable harm 21 it seeks to remedy—its destruction as a business. 22 Mahoney’s averment that “this will soon reach a tipping point where Stackla can 23 no longer operate” is inherently speculative, although it is the precise question at issue in 24 plaintiffs’ motion. Plaintiffs do not offer any indication about their financial strength or the 25 likelihood that they will dissolve as going concerns at any particular point in time. This 26 court cannot hinge a finding that Stackla faces the threat of being driven out of business, 27 caused by conduct likely to occur prior to a preliminary injunction hearing, based on its 1 relief of a pre-adjudicatory injunction demands more precision with respect to when 2 irreparable harm will occur than “soon.” Such vague statements are insufficient evidence 3 to show a threat of extinction. Am. Passage Media Corp., 750 F.2d at 1474 (statements 4 that a company has “sustained large losses” in the past and “forecast[s] large losses 5 again” in the future “are insufficient evidence that [plaintiff] is threatened with extinction”); 6 see also AboveGEM, Inc. v. Organo Gold Mgmt., Ltd., Case No. 19-cv-04789-PJH, 2019

, at *5 (N.D. Cal. Aug. 16, 2019) (“plaintiff does not offer any indication of 8 when it would be driven out of business, or underlying financial information that would 9 demonstrate imminent, irreparable harm”); Int'l Medcom, Inc. v. S.E. Int'l, Inc., Case No. 10 15-cv-03839-HSG,

, at *5 (N.D. Cal. Dec. 2, 2015) (no irreparable 11 harm where “the record does not contain non-conclusory evidence sufficient to establish 12 that (1) [plaintiff’s] survival is a matter of weeks or months, (2) [defendant] caused 13 [plaintiff’s] financial troubles, and (3) if Plaintiff is ultimately successful, 14 compensatory damages and injunctive relief would be inadequate”). 15 2. The Public’s Interest 16 Plaintiffs argue that the public interest favors an injunction because one would 17 prevent the imminent destruction of Stackla’s business, preserve employee jobs, and 18 generally allow Stackla to continue operating. Additionally, they argue that the public 19 interest will be served by enjoining defendants’ wrongful conduct. Defendants argue that 20 the public has an interest in allowing Facebook to exclude those who act impermissibly 21 on its platform and jeopardize user privacy by, in this instance, automating data collection 22 and scraping content en masse. Facebook argues that the public has an interest in 23 allowing it latitude to enforce rules preventing abuse of its platform. 24 The court finds that the public’s interest cautions against issuing injunctive relief at 25 this time. 26 Plaintiffs’ arguments that the public interest supports enjoining conduct that 27 violates civil statutes is surely correct, but plaintiffs are seeking pre-adjudicative injunctive 1 remedy of an injunction prior to a determination on the merits (and even prior to hearing 2 this pre-adjudicatory injunctive question on a normal briefing schedule), plaintiffs’ appeal 3 to the public interest of enjoining statutory violations begs the question. Moreover, Winter 4 requires that plaintiffs show their likelihood of success on the merits as a separate 5 element, and the court declines plaintiffs’ invitation to subsume the distinct element 6 assessing the public’s interest into plaintiffs’ likelihood of success on the merits. If an 7 argument that a plaintiff is likely prevail on the merits were enough to satisfy the public’s 8 interest in an injunction, the public’s interest would be a superfluous element in the 9 analysis. 10 On plaintiffs’ request for emergency injunctive relief, the court assesses the 11 public’s interest given the facts before it on this very abbreviated briefing schedule. 12 Declining injunctive relief at this stage might result in a final award for plaintiffs that is less 13 than fully compensatory, because the business may be defunct due to events that occur 14 between now and when a preliminary injunction might issue following a 35-day briefing 15 schedule. Moreover, some (unspecified number) of plaintiffs’ employees may lose their 16 jobs due to events occurring in that time period. 17 Awarding injunctive relief at this stage would compel Facebook to permit a 18 suspected abuser of its platform and its users’ privacy to continue to access its platform 19 and users’ data for weeks longer, until a preliminary injunction motion could be resolved. 20 Moreover, as precedent within Facebook’s policy-setting organization and potentially with 21 other courts, issuing an injunction at this stage could handicap Facebook’s ability to 22 decisively police its social-media platforms in the first instance. Facebook’s enforcement 23 activities would be compromised if judicial review were expected to precede rather than 24 follow its enforcement actions. 25 Although the public certainly has some interest in avoiding the dissolution of 26 companies and the accompanying loss of employment, Facebook’s ability to decisively 27 police the integrity of its platforms is without question a pressing public interest. In 1 Facebook’s policing of those platforms for abuses, and Facebook’s protection of its users’ 2 privacy. Congress’s ample attention to such abuse is more than enough to demonstrate 3 the importance of those interests to the public, as are Facebook’s recent interactions with 4 the FTC. See generally, Facebook: Transparency and Use of Consumer Data: Hearing 5 Before the Committee on Energy and Commerce, House Of Representatives, 115th 6 Cong. (2018); Plaintiff’s Consent Motion for Entry of Stipulated Order for Civil Penalty, 7 Monetary Judgment, and Injunctive Relief and Memorandum in Support at 2–3, United 8 States v. Facebook, Inc., Case No. 19-cv-02184-TJK (D.D.C. July 25, 2019), Dkt. 4 9 (Facebook consenting to $5 billion civil penalty in action brought by FTC based on, inter 10 alia, Facebook “[1] maintaining deceptive settings that misled users about how to protect 11 their information from being shared by Facebook with third-party developers of apps . . . 12 [2] promising to stop giving app developers access to the data of app users’ Friends 13 starting in 2014, when in fact many app developers continued to have such access past 14 that date . . . [and 3] inconsistently enforcing its privacy policies against app developers 15 who violated those policies”). 16 For the foregoing reasons, the public’s interest favors allowing Facebook’s ban of 17 allegedly-abusive entities from its platforms to remain in effect pending at least a motion 18 for preliminary injunction. 19 CONCLUSION 20 For the foregoing reasons, plaintiffs’ motion for a temporary restraining order is 21 DENIED. Plaintiffs may file a motion for a preliminary injunction by October 9, 2019, on 22 the normal briefing schedule set out by this court’s local rules and standing orders. 23 IT IS SO ORDERED. 24 Dated: September 27, 2019 25 /s/ Phyllis J. Hamilton PHYLLIS J. HAMILTON 26 United States District Judge

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