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Tropical Sails Corp. v. Yext, Inc.

United States District Court, S.D. New York

May 18, 2015

TROPICAL SAILS CORP., Plaintiff,
v.
YEXT, INC., Defendant.

Allen Carney, Esq., CARNEY BATES & PULLMAN, PLLC, Thomas M. Mullaney, Esq., for Plaintiff TROPICAL SAILS CORP.

Gavin J. Rooney, Esq. Jewel Watson, Esq. LOWENSTEIN SANDLER LLP. for defendant YEXT, INC.

OPINION & ORDER

JOHN F. KEENAN, District Judge.

Before the Court is Defendant Yext, Inc.'s motion to dismiss Plaintiff's putative class action complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Defendant's motion seeks dismissal on the grounds that (1) the complaint fails to allege consumer-oriented conduct as required to state a claim under sections 349 and 350 of the New York General Business law; (2) the complaint fails to allege fraud and fraudulent inducement with particularity as required by Rule 9(b) of the Federal Rules of Civil Procedure; and (3) Plaintiff's claim for unjust enrichment is precluded by the existence of a contract between the parties. For the reasons discussed below, Defendant's motion is denied, except that counts three and four of the complaint-which assert claims under New York General Business Law sections 349 and 350 for deceptive acts and practices and false advertising, respectively-are dismissed.

I. Background

The following facts are taken from the allegations in the complaint and are accepted as true only for purposes of this motion to dismiss. Plaintiff Tropical Sails Corp. is a small business located in Surprise, Arizona, which "facilitates cruises in locations throughout the world." (Compl. ¶ 7.) Defendant Yext is an online advertising company that assists businesses in monitoring whether their information is accurately listed on web directories. (Id. ¶ 1.) Yext's primary product is the PowerListings Service, which is marketed as four separate subscriptions priced between $199 and $999 per year. (Id. ¶ 12.) Plaintiff alleges that the most popular of these is the $499per-year "Complete" package. (Id.)

According to Plaintiff, Yext identifies potential customers through a free "Scan Your Business" search (hereinafter, the "business scan") offered on its website. This search prompts visitors to enter their business's name and phone number in order to compare that information against the records of Yext's partner web directories. (Id. ¶ 13-14.) Visitors are then transferred to a results page showing any errors found in online listings associated with the visitor's information, such as that the listings are "Not Standing Out" or are of an "Unverified Business." (Id. ¶¶ 15-17.) These errors are presented as either a total number of "Location Data Errors" or an "Error Rate" warning that "[X]% of the time customers search for you, they will see incorrect information!" (Id.)

Plaintiff asserts that the data errors identified by Yext's business scan do not have any actual bearing on the accuracy of a business's online listings; rather, Plaintiff alleges that the scan is deliberately engineered to show errors for any business that has not purchased Yext's PowerListings service. (Id. ¶¶ 17-20.) Plaintiff also alleges that the primary purpose of the business scan is to provide Yext with the names and telephone numbers of visitors to its website so that Yext can follow up with sales calls about the PowerListings service. According to Plaintiff, the telemarketers who make these calls are instructed by Yext to misrepresent both the benefits of PowerListings and the number of data errors found in Yext's partner web directories associated with the potential customer's business. (Id. ¶¶ 24-29.) Because Defendant supposedly knows that these representations are false, Plaintiff contends that Yext's business model is designed around "high-pressure sales tactics, " rather than customer satisfaction and retention. (Id. ¶¶ 30-31.) Plaintiff therefore alleges that Yext's strategy is "to get as much in up-front fees from new customers as possible, " on the assumption that most will become dissatisfied and cancel their PowerListings subscription at the earliest opportunity. (Id.)

Consistent with the allegations concerning Yext's general business practices described above, Plaintiff states that it first visited Yext's website on or about January 14, 2014 and entered its business name and telephone number into the "Scan Your Business" search box. (Id. ¶ 33.) According to Plaintiff, it was then directed to a results page indicating the existence of multiple "Location Data Errors, " including that each identified listing was "Not Standing Out." (Id.) That same day, a Yext telemarketer purportedly contacted Plaintiff, claiming that there were errors and inconsistencies in Plaintiff's business listings "across Yext's network of Web directories" and promising that PowerListings would "fix these inaccuracies... and feature [Plaintiff's] business in Yext's partner Web directories whenever consumers conducted searches for comparable businesses." (Compl. ¶ 34.) Following this call, Plaintiff purchased the "Complete" PowerListings package for an annual fee of $499. (Id.)

Roughly four months later, Plaintiff states that it again checked the status of its online listings through the business scan on Yext's website and through a review page provided as part of Plaintiff's PowerListings subscription. (Id. ¶¶ 36-37.) In both instances, the results showed that Plaintiff's listings had been published across all of Yext's network of web directories-with the possible exception of the websites "Citybot" and "Local.com"-and that each directory was free from errors and was "PowerListings Synced." (Id.) However, despite the alleged promise by the Yext Telemarketer that PowerListings would fix inaccuracies in Tropical Sails' listings and feature Plaintiff's business in Yext's partner Web directories, Plaintiff contends a subsequent search for Tropical Sails on "EZ Local"-one of Defendant's partner web directories-returned no results when relevant search terms were entered. (Id. ¶¶ 38-39.) Similarly, another partner directory-"AmericanTowns"-listed Plaintiff's business beneath sixty-eight other listings, "many of which ha[d] no relation to the search terms." (Id. ¶ 40.)

On September 18, 2014, Plaintiff commenced this action by filing a class action complaint against Yext. On November 13, 2014, Defendant advised the Court that, in lieu of an answer, it had served Plaintiff with the present motion to dismiss. The motion was fully briefed on December 23, 2014 and oral argument was held on April 8, 2015.

II. Discussion

A. Legal Standard

A motion to dismiss should be denied so long as the complaint "contain[s] 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)). Accordingly, in addressing a 12(b)(6) motion, a court must accept the plaintiff's allegations of fact as true and draw all reasonable inferences in the plaintiff's favor. See Ganino v. Citizens Utils. Co., 228 F.3d 154, ...


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