Background
Levelfields, Inc. filed a First Amended Class Action Complaint alleging breach of contract against Reddit, Inc. The district court dismissed the complaint with prejudice for failure to state a claim. Levelfields appealed the dismissal and the denial of leave to amend.
The court’s reasoning
The court reviewed the dismissal de novo and evidentiary rulings for abuse of discretion. Under California law, contracts are construed as a whole and undefined terms receive their plain, ordinary meaning. The court found the term click was not ambiguous despite the lack of a definition, noting the contract acknowledged third parties might generate clicks for improper purposes. This supported a broad interpretation intended by the parties. The district court did not abuse its discretion in excluding an email from Reddit as extrinsic evidence because it did not create ambiguity. Additionally, Levelfields admitted it did not allege Reddit failed to use reasonable means to deliver ads, so no factual issue existed. The court affirmed on these grounds without addressing alternative arguments regarding the exclusive claims process.
What it means going forward
The decision reinforces that undefined contract terms in digital advertising agreements may be interpreted broadly based on the contract’s overall context and the parties’ intent, limiting the use of extrinsic evidence to create ambiguity.
Podcast (federal-narrative-summaries): Play in new window | Download