[00:00:00] Speaker 04:
The next case on calendar for argument is Levelfields versus Redditt.

[00:00:06] Speaker 03:
Is it Alaska?

[00:00:08] Speaker 04:
They have it last.

[00:00:09] Speaker 03:
Okay.

[00:00:29] Speaker 04:
That was weird to me too. Yeah, that was weird that they separated.

[00:00:55] Speaker 04:
Good morning, Council.

[00:00:57] Speaker 01:
Morning, Your Honors.

[00:01:08] Speaker 01:
May it please the court, Alfredo Chirijos on behalf of Plaintiff Appellant Level Fields, Inc.

[00:01:15] Speaker 01:
This appeal is about whether Reddit could obtain dismissal at the pleading stage by applying its own definition of an undefined contract term. the word click, and by recasting Levelfield's claim as a mere server discrepancy dispute.

[00:01:35] Speaker 01:
Our claim is both narrower and simpler than that.

[00:01:39] Speaker 01:
Under a pay-per-click agreement, Reddit could not bill for non-genuine, non-user-initiated, non-destination-reaching events as if they were billable clicks.

[00:01:53] Speaker 01:
At a minimum, the contract is reasonably susceptible to that reading.

[00:01:58] Speaker 03:
Can you explain to me why? Because you seem to be taking a reading that would – I mean, a click is a click. A click is a click. And you seem to say, no, a click is not a click. There are certain clicks that are valid, and there are certain clicks that are not valid. What is it in the contract that would lead us to your interpretation?

[00:02:21] Speaker 01:
Yes, Your Honor.

[00:02:23] Speaker 01:
The point in the contract really is, first of all, that the term click itself is not defined, right?

[00:02:33] Speaker 03:
I understand that.

[00:02:35] Speaker 01:
I'm sorry.

[00:02:36] Speaker 03:
I understand that click is not defined, but what is it in the contract that would lead us to believe that there's two types of clicks?

[00:02:45] Speaker 01:
Because the contract does say that the advertiser will pay after your ad is delivered.

[00:02:53] Speaker 01:
For pay-per-click campaign, delivery occurs through a click.

[00:03:00] Speaker 01:
And delivery according to your criteria, level feels criteria included reaching actual users in specific community, a bot click delivers nothing to anyone.

[00:03:15] Speaker 01:
Moreover, Reddit's own advertising manager, as we noted in our First Amendment complaint, When asked by Level Field's CEO, responded that a click is an event that takes a user to your landing page. At the very least, the term is ambiguous and should not have been resolved against us. I understand, Your Honor, that it's very easy to say a click is a click, and that's what the district court effectively found. But the reality is that if a click is a click, meaning any action on a link, that would then trigger exiting to whatever the landing page is, whether it's an outside landing page or a comment within Reddit, then under that definition, we could just have a robot sitting there within Reddit's own servers.

[00:04:08] Speaker 03:
And there is a provision for, I mean, you put that into kind of a shenanigan box, and there's a provision for you to go to Reddit and challenge those types of...

[00:04:23] Speaker 03:
clicks. Did you do that here?

[00:04:25] Speaker 01:
Well, here we did attempt to do that. So our client approached part of that email soliloquy that's included in our first amendment complaint was that our client approached Reddit and said we are having a lot of being charged for a lot of clicks all of a sudden and I don't see any activity on our server.

[00:04:49] Speaker 01:
It just isn't rising. could you please provide me a log of the clicks that had been happening? Reddit responded by providing a log, but then not providing any IP addresses from which those clicks originated.

[00:05:03] Speaker 04:
Did the contract require them to do that?

[00:05:05] Speaker 01:
It does not. There's nothing in the contract that specifies that one way or the other, Your Honor, and that is part of the issue as to the sole remedy clause. We have a sole remedy clause where under Reddit's reading of the contracting, It gets to choose what a click is, right?

[00:05:23] Speaker 04:
Well, the parties agree to the use of the term click. That's the difficulty without specifying what constitutes a click for purposes of this contract. And absent specification, then the ordinary meaning of click controls. So that's why I think you're in a difficult position here in terms of a contract argument.

[00:05:45] Speaker 01:
Well, in fact, Your Honor, I would disagree on that point.

[00:05:50] Speaker 04:
What point do you disagree on?

[00:05:53] Speaker 01:
That I'm in a difficult position because the general definition of click is understood by everyone. Because the email from Reddit's own sales representative gave a definition of click that complies exactly with our definition.

[00:06:09] Speaker 00:
After the fact. After the fact. And outside of the context of the contract. Of the contract. But the contract also advises level fields explicitly that you acknowledge that third parties may generate impressions, clicks, or other desired actions with respect to your advertisements for prohibited or improper purposes. So it seemed that the contract anticipated that there could be actions that were done improperly that could be construed as clicks and that the level fields took that risk when they entered the contract.

[00:06:41] Speaker 00:
But it doesn't say that Reddit will then be responsible for distinguishing between these different types of clicks. Or does it? Is it your position that level fields was required to, with each click before billing, make sure it was a valid click from a potential customer?

[00:06:59] Speaker 01:
I think there are three points in there. I want to address your very last question, Your Honor. Level fields did not have an obligation under our reading of what is commercially reasonable to affirmatively determine whether each click was, quote, unquote, valid. Nor did level fields.

[00:07:15] Speaker 00:
Reddit.

[00:07:16] Speaker 01:
Excuse me, Reddit. Thank you very much, Your Honor.

[00:07:22] Speaker 01:
And to the district court's misreading of our opposition where the district court said, you know, we are. we limited our position just to whether, in fact, clicks landed at our page, right? That would require LevelFields, as it points out correctly, to potentially go to each of its clients and say, hey, can I see your server logs? We're not arguing that. But LevelFields does have an obligation to get rid of clicks that are clearly... Oh, goodness, Your Honor, thank you so much.

[00:07:54] Speaker 01:
Reddit does have an obligation to...

[00:07:58] Speaker 01:
Filter out clicks that clearly are not genuine user generation.

[00:08:03] Speaker 03:
I don't understand that. I understand just the opposite, that you have an opportunity to bring to Reddit. Reddit doesn't have to do anything. A click is a click.

[00:08:15] Speaker 03:
Until you come forward and say, hey, we think that this click is not a click. And then there's a process for determining that. You sort of started that process, but you never really finished that process, if I understand it correctly.

[00:08:30] Speaker 01:
Yes, and that actually goes back to Judge Bates' question regarding that very provision, the sole remedy provision inside the contract. And two points there, Your Honor. First, the claim process would require level fields, as Your Honor just stated, to detect the fraud within 45 days, right? Here, Reddit refused to provide the IP addresses which would have been necessary to be able to determine whether fraud was occurring.

[00:09:04] Speaker 01:
It didn't have an obligation to provide that. But absent that, then this whole process where the advertiser has to go to Reddit and say, hey, listen, there's a discrepancy that I'm seeing here And the way to prove it is within your control. And then Reddit says, yeah, we're not going to give you that, right? Either we don't have it or we don't want to give it to you.

[00:09:29] Speaker 03:
Well, there's a lot of reasons they might not want to give it. I mean, they don't have a duty to tell you where the IP clicks are coming from. I mean, you know, that's their proprietary information, presumably. Right.

[00:09:43] Speaker 01:
But then it renders that sole remedy clause completely illusory, right? It requires the advertiser to come forward. And again, if we give credit, complete discretion to define what a click is and whether it occurred or didn't occur, and it doesn't matter where it came from. We just want to charge for it. And then the user, the advertiser comes and says, hey, listen, you know, I see a discrepancy here.

[00:10:13] Speaker 01:
You, Reddit, are the one that has the information that would allow me to determine whether there is or isn't fraud occurring here, right? Those IP addresses might show a lot of these coming from Reddit's own IP address. It might be internally that people are within Reddit checking on that. That's not a genuine user interaction. So it does render that sole remedy clause completely illusory, and I think that the facts in this case bear that out, right? We had our client come forward,

[00:10:44] Speaker 04:
raise an issue of seeing seeing you know a lot of being charged for a lot of activity and not seeing a lot of activity on their server all all of a sudden a change but as judge nelson indicated you didn't see the process through if you made a claim to reddit and said you know we want a refund for this amount or this this number of clicks and reddit refused that then you would have completed the process, but just telling them and asking them for additional information didn't really complete the process.

[00:11:16] Speaker 04:
So how can it be illusory if you didn't complete it?

[00:11:21] Speaker 01:
Yeah, Your Honor, the record, I'm trying to remember how much I put into the first amendment complaint, but I believe the client, well, I know the client did ask for a refund. Whether I put that in the record or not, I honestly, as I sit here now, will have to go back to the first amendment complaint.

[00:11:39] Speaker 01:
and that that was denied. The client also then refused to pay bills that started coming in until they received those IP addresses. So I don't know whether we can definitively say formally that the claims process was initiated and denied, or if it was initiated and then we kind of fell through at whether the IP addresses were being provided or not.

[00:12:09] Speaker 01:
But I do think that, again, it does show that that sole remedy clause is illusory. If we're just going to treat any click as a click, then relying on the advertisers to come forward and somehow prove otherwise when Reddit is a judge and jury on that question.

[00:12:29] Speaker 04:
The problem, counsel, is that's what the contract said, a click is a click. with caveats about there may be some clicks that are, you know, for nefarious purposes or third party or stray or random. So how can we say there's a breach of contract if the contract clearly contemplated that?

[00:12:52] Speaker 01:
I don't think the contract clearly contemplated that, Your Honor. I think the contract, first of all, the contract never says a click is a click.

[00:12:57] Speaker 04:
Well, it doesn't define click. That means a click is a click. If it doesn't give a specific definition or a technical definition or an agreed-upon definition of what the click is, then a click is a click if it's not defined.

[00:13:15] Speaker 01:
Well, then what do we mean when we say a click is a click, right?

[00:13:19] Speaker 04:
It's the common understanding of what a click is in the – A user-generated... Or in the ordinary sense of its term, right?

[00:13:27] Speaker 01:
A user-generated interaction, I think, is what most of us think of a click, right? When we were talking about you clicked on that link... You put your finger down. You put your finger down, you know. And that is not when a bot generates that.

[00:13:43] Speaker 04:
Well, a bot... At some point, there is a human being behind the bot. So... Somebody is programming that somewhere. There's a human being in the mix somewhere. It's not some untethered bot that's in iRobot style manufacturing these clicks.

[00:14:03] Speaker 01:
Well, it may very well be that no one ever intentionally said, I want to click on this link. You could program a bot, a spider to index the web, Google. And Google can go through and see, and it clicks on those links, not because it wants. The programming is amazing. It is amazing, Your Honor.

[00:14:23] Speaker 03:
The problem is you bear the burden to show that this is not a click or not a countable click. And I just don't see where you did that. Your main complaint is, well, we couldn't do that because Reddit wouldn't help us do it. And I don't see where that's their job in the contract.

[00:14:43] Speaker 01:
and again your honor but then if we allow them to define this um and and when the word click is not defined if they had said we get to choose what a click is they they did say we measure what a click is and we don't have a problem with that and i think that's where um our argument maybe led you know the district court astray a little bit but you know what what we were saying was um You have a butcher, and I can agree that your scale is the scale we're going to use.

[00:15:15] Speaker 01:
I'm buying apples, and the butcher puts a couple oranges on there.

[00:15:20] Speaker 01:
I still can agree on your scale, but that's not what I agreed to buy. And my point is that a click that is not a genuine user-initiated action is not what is commercially understood as being a click. And that's the definition we had to apply.

[00:15:36] Speaker 04:
Counsel, did you want to save some time for rebuttal?

[00:15:38] Speaker 01:
I'll save my 30 seconds, Your Honor. Thank you. Thank you.

[00:15:48] Speaker 02:
May it please the court, Fred Riley, Jr., for appellee read it.

[00:15:53] Speaker 02:
The district court properly dismissed Level Field's first amended complaint because despite being given leave to amend, its theory of improper billing is still contradictory to the ad term's language and plain meaning. I'd like to focus on a factual issue that came up in the questioning by Judge Rawlinson and Judge Nelson about what happened here. If you look at the first amended complaint around paragraph, I believe it's 27, you'll see that Reddit did provide logs for the information, the traffic information on Reddit's server.

[00:16:30] Speaker 03:
They're claiming that it was useless information. They couldn't use the logs.

[00:16:35] Speaker 02:
But I think, as Your Honor pointed out, you don't need the IP addresses in order to do an analysis of what the anomaly is, the discrepancy between the ad traffic on your server, or in this case, level field server, and what you were billed. And Reddit never got that kind of information. And what the contract contemplates is if an advertiser has a billing problem, it will make a claim for an ad credit and complain to Reddit.

[00:17:07] Speaker 02:
And as Judge Rawlinson noted, that process, the level fields just didn't see it through. I would note that level fields could walk away at any time.

[00:17:16] Speaker 02:
Section 5 of the contract says you may request a modification or cancellation of your plan at any time. And that's important because Reddit is highly incentivized to work with advertisers. And so level field acts as though this process really gives Reddit some kind of complete discretion over whether an advertiser is entitled to an advertising credit But this is an advertising-based platform, and the advertisers can just walk.

[00:17:45] Speaker 03:
How much money are we talking about here? Do you have any sense?

[00:17:49] Speaker 02:
I don't, Your Honor. It's certainly not pled. And in fact, if you look at the complaint, Levelfield never articulates what the amount of overcharge was, how many clicks it was overcharged for. It doesn't explain what the discrepancy was between the ad server. It takes a screenshot of a general or generic ad server a dashboard and puts it in the complaint, but doesn't explain whether there was any discrepancy.

[00:18:16] Speaker 03:
If they had simply said, look, you're counting us for, you know, 5,000 clicks in this one day, we can show you that only 400 people showed up on our website on that day. Would that be enough information for you to say, Hey, there's something here. We can't be charging them for all of this.

[00:18:36] Speaker 02:
I'm sure your honor that first of all, It's not in the complaint. I just want to be clear about this. But this is a process that advertisers do avail themselves for. And I think the complaint actually does acknowledge that there are advertising credits that are issued. So in that exchange, that kind of problem can be identified and it can be the basis of a credit. But there aren't enough factual allegations.

[00:19:02] Speaker 03:
It just never happened here.

[00:19:03] Speaker 02:
It just never happened here. They didn't respond, even though Reddit provided them with the click logs. That should have allowed them to do that. They just asked for the IP addresses.

[00:19:16] Speaker 02:
And it makes good sense. I do think my friend suggests that there's something sort of nefarious about Reddit being able to charge for clicks as they are just generally understood. But there are lots of reasons why a click that originates at Reddit's server doesn't necessarily arrive or isn't necessarily received by an advertiser's server. And a lot of those reasons are innocuous. There could just be bad Wi-Fi.

[00:19:47] Speaker 02:
There could be an error on either the originating server or the receiving server. The user could just lose interest. And so it makes sense to track that data on Reddit's server and then allow the advertiser to come forward if there's some kind of a problem. So the contractual regime that we think is quite clear on the face of the contract makes good sense, and it's not commercially unreasonable, as my friend suggests.

[00:20:15] Speaker 04:
Counsel, what's your response to opposing counsel's argument that the term click was not defined?

[00:20:22] Speaker 02:
Your Honor, it wasn't defined, but as the Nova case says, just because a click isn't, a click, a term, isn't expressly defined in a contract doesn't mean that it's ambiguous. And we think that term in this context has a generally understood meaning, and that's the way in which the contract uses it. The contract says that clicks, impressions, and views will be billing metrics that are the basis for Reddit's billing to an advertiser.

[00:20:55] Speaker 02:
It just uses the term in that general way. So the district court, we think, was right when it said, and I quote, Clicks is an unambiguous term that simply means, as Levelfields otherwise admits, when a legitimate user or a bot or a fraudster clicks on an ad. And that has to be right on the terms of the contract because the contract acknowledges that there will be some clicks that may be done as a result of prohibited conduct or fraudulent conduct. And the contract actually says that you, the advertiser, acknowledge that.

[00:21:31] Speaker 02:
So the way that the word click consistent with ordinary parlance is actually used in the contract encompasses clicks that are prohibited or clicks that are fraudulent. It acknowledges that. And I would note that even level fields in its complaint uses clicks in this general way. Look at paragraph 10 of their complaint, just as an example, because this is suffused throughout the complaint, that they use it not just to encompass, as they say on appeal, clicks that are done by an actual user that land a user on the advertiser's page, but that also include fraudulent clicks.

[00:22:10] Speaker 02:
I'll just quote from paragraph 10 where they say, fraudulent clickers use software programs that automatically click, using that word, on ads hundreds or thousands of times. And so I do think the complaint and the face of the contract use the word click in exactly the way we all understand it. and not to only mean clicks that are successful. I'd like to turn quickly to the email exchange that Level Fields relies on, because even on that, they try to use that email exchange, which was more than a year after the fact, to modify the term click, but the district court considered it consistent with California law and rightfully concluded that it generated no ambiguity, because even that email exchange doesn't, first of all, purport to address billing, but doesn't define a click to mean a successful click, one that successfully transfers a user to a web page.

[00:23:10] Speaker 02:
That is something that Level Fields is inserting into the language.

[00:23:13] Speaker 03:
But doesn't it create some ambiguity about whether these clicks were real clicks in the real sense? I mean, I guess that's the one question here. This was dismissed on a motion to dismiss. Shouldn't that have been enough to send it to a summary judgment proceeding at least to figure out is there something that needed to be done here?

[00:23:40] Speaker 02:
No, Judge Nelson, and here's why. You can look to extrinsic evidence to support a construction or a reading that is reasonable on the face of an agreement. But what you can't do, and this court's decision in skill staff makes this very clear, what you cannot do is use extrinsic evidence to support a reading that is unreasonable on the face of a contract. And that's how they're trying to use... Well, but I don't know...

[00:24:07] Speaker 03:
I mean, I guess it depends on how you're defining it to be used. But even you agree that if they came in and said, hey, look, whatever the definition of click is, we're not getting the benefit of the bargain here because you're showing 5,000 clicks and we don't even have that – we have a tenth of that people of that number showing up on our website. So something's amiss here.

[00:24:29] Speaker 03:
Why wouldn't that – I mean, I'm not sure I'm suggesting that the email defines the word click, but it sort of defines some ambiguity about whether they're getting the benefit of the bargain. Why isn't that enough to go in and delve into the actual facts here?

[00:24:47] Speaker 02:
A couple of responses. One, I think in response to your honor's hypothetical, all I meant there was that if it's possible, consistent with the terms of the agreement that there's prohibited conduct or fraudulent conduct that is inflating these click counts, that that will get worked out in the process that is set forth in the contract.

[00:25:08] Speaker 03:
But turning again to this point is just to just to put a finer point on it.

[00:25:11] Speaker 02:
Yes.

[00:25:12] Speaker 03:
The email in litigation is not consistent with the process. So even if the email had you dead to rights saying, hey, you know what? We finally figured this out. You would say you had 45 days to do that. You're a year later. Sorry.

[00:25:28] Speaker 02:
Yes. But but I think to your to your initial question, the more the more important thing is that that this email, even if you read it in the district court, It said, nothing in the email supports a definition of clicks that are chargeable only if they result in measurable activity on an advertiser's site or creates ambiguity in the contract. You can't read this email and say, aha, I'm looking at the language that defines what is billable. And it says that only clicks that act successfully take you to a landing page, those are the only clicks that are going to be billable.

[00:26:02] Speaker 02:
The email simply cannot do that work.

[00:26:06] Speaker 02:
And for that reason, it can't create any ambiguity.

[00:26:09] Speaker 03:
I agree. I'm not necessarily disagreeing with you on that point. My point is...

[00:26:14] Speaker 03:
I guess this goes to what is that process? And at the end of the day, the process is they come to you, they say something doesn't look right, and they're relying on your good faith. You want to keep them as a customer. You're going to work with them.

[00:26:29] Speaker 03:
But there's no specific process in that 45-day period that Reddit has some obligation to count or discount clicks other than business operations.

[00:26:42] Speaker 02:
Well, so the contract says prohibited or fraudulent conduct, first of all. And the contract also says reasonable discretion. So there are these boundaries on Reddit's discretion. And the most important one is the advertiser can walk at any time.

[00:27:00] Speaker 03:
I understand. I just don't know why the email doesn't create some sort of factual evidence. dispute and and and i don't know because the district court didn't deal with this what the district court said was it doesn't change the definition agreed fine but why doesn't it lead to some sort of well did you comply with this uh you know negotiated process on discounting fraudulent or or you know using your discretion to determine whether these clicks should count so it

[00:27:35] Speaker 02:
The relevant question, two responses. The relevant question for purposes of considering extrinsic evidence in this kind of context is whether it supports the interpretation that is offered by, in this case, level fields and whether that interpretation is reasonable. They are saying that this email supports their proffered construction, and their proffered construction is very clear. They say on page nine of their opening brief, Their core premise, that's what they call it, a click and a pay-per-click arrangement must be a bona fide user-initiated event that actually sends an actual user to the advertiser's link.

[00:28:15] Speaker 02:
That's their proffered construction. It's not reasonable on the face of the contract.

[00:28:22] Speaker 03:
The wrong argument. And maybe that's the right answer. But if they just said, hey, look, everyone knows, any reasonable person would know something was going on here, and Reddit didn't work with us. That would have been a different case.

[00:28:40] Speaker 02:
Different case, and it gets to the initial questions by Judge Rawlinson and by Your Honor, which are factual in nature. And the real problem here is that Levelfield's never articulated what the discrepancy or what they called the anomalies were, and nothing in this email exchange explains that. So even this email, which just generally talks about how a click is used in the dashboard context, doesn't get to what the problem was.

[00:29:08] Speaker 02:
And they simply never offered, even though it's not in the complaint, but even though the long email exchange actually includes a request by Reddit, for an explanation of what these anomalies were, level fields never provided it. And that's really the fundamental problem here, Your Honor, in addition to the facially unreasonable construction that grounds the complaint. Are there no other further questions?

[00:29:38] Speaker 04:
Thank you, counsel.

[00:29:40] Speaker 04:
Rebuttal?

[00:29:47] Speaker 01:
Yes, Your Honors. Very quickly, two points. Actually, three. First of all, I went back and did not include the full email chain that my friend here mentioned. That does go through the entire process of the claim process. The fact that we're talking about so many facts here does suggest that this is a motion for summary judgment issue. The second issue I wanted to address very quickly is with regard to that email and the district court's consideration of it. The district court brought it up and said it doesn't apply here based on the definition that i believe the plaintiffs are applying here that it that only clicks that actually resulted in a landing at the page are clicks that is not our argument what um my my friend here said for read from my opening brief is a bona fide action by a user that sends someone to the landing page We agree.

[00:30:43] Speaker 01:
It doesn't require that the person reach the landing page. They could turn off their browser midway through. They could click back. There could be an interruption in service. So our argument is not about reaching the landing page. It's everyone understands that a click, for purposes of pay-per-click, is when it's a user-generated event that sends the person out to the landing page. With that, I thank the court very much for its time.

[00:31:10] Speaker 04:
Thank you, counsel. Thank you to both counsels. The case just argued is submitted for decision by the court.