Programmers Cannot Reasonably Demonstrate That GitHub's Actions Caused Them Economic Loss

ARGUMENT

IV. PLAINTIFFS’ TORT AND UCL CLAIMS FAIL.

C. Plaintiffs’ Fraud Claim Against GitHub Is Barred By The Economic Loss Rule And Fails Rule 9.

“The elements of fraud … are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” Lazar v. Superior Ct., 12 Cal. 4th 631, 638 (1996) (quoting 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 6765, p. 778). Federal Rule of Civil Procedure 9(b) further requires Plaintiffs to “state with particularity the circumstances constituting fraud.” This required “specificity includ[es] an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (cleaned up).

Plaintiffs assert that “in both its Terms of Service and its Privacy Statement, GitHub promises not to sell Licensed Materials or anything else uploaded to or shared with GitHub.” Compl. ¶ 195. But Plaintiffs nowhere allege that GitHub made these statements with “knowledge of falsity,” “intent to defraud,” or to “induce [unjustified] reliance.” Lazar, 12 Cal. 4th at 638. The Complaint states merely that Plaintiffs “relied upon [GitHub’s] representations in choosing to upload Licensed Materials to GitHub,” in part because “GitHub has long held itself out as the best place to host open source code repositories.” Compl. ¶ 196. These vague assertions do not suggest GitHub’s intentions to commit fraud, particularly in light of the other provisions of the TOS. See supra 3, 15-17. Nor, as discussed, have Plaintiffs alleged any “resulting damage.”

Ultimately, then, the basis of Plaintiffs’ claim is merely that GitHub “failed to honor its representations.” Compl. ¶ 197. That is a breach of contract claim, and thus barred by the economic loss rule. “The economic loss rule” dictates that “purely economic loss due to disappointed expectations” cannot be remedied in tort “unless [the Plaintiff] can demonstrate harm above and beyond a broken contractual promise,” therefore “prevent[ing] the law of contract and the law of tort from dissolving one into the other.” Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 979, 988 (2004) (cleaned up). The fraud claim against GitHub is merely derivative of alleged promises in the contractual TOS and the Complaint identifies no loss, let alone one independent of the promises of the TOS. Plaintiffs’ fraud claims should be dismissed.