Affiliate Marketer Can Survive Motion To Dismiss On Breach Of Contract For Referrals

Richard Raysman is a Partner in Holland & Knight's New York office.

Affiliate marketers are a considerable cog in assisting companies, including search engines and online retailers, in guiding potential customers to click on sponsored links. In expediting the acquisition of potential customers, affiliate marketers receive a commission, generally on a per-click basis. A recent case in Massachusetts, Licensed 2 Thrill, LLC v. Rakuten, Inc., No. 13-11257-DJC (D. Mass. Sept. 15, 2014), epitomizes the lucrative potential of these arrangements both for the companies seeking customers via sponsored links, and the affiliates powering this engine. Unsurprisingly since this particular relationship made it to court, it illustrates exactly how the relationships can go wrong, particularly when an unwritten course of dealing between contracting parties complicates the obligations memorialized in the ostensibly governing written agreement.

Facts

Licensed 2 Thrill (L2T) is a company engaged in business development and marketing, primarily by using contacts to "produce business opportunities [and] develop sales channels." FreeCause is an affiliate marketing service that had developed software that allows Internet users to opt into loyalty/affinity programs for popular brands and charities. In 2008, FreeCause entered into a Referral Partner Program Agreement (RPP Agreement) with L2T in which L2T would introduce FreeCause to certain businesses, businesses to which FreeCause could promote its software. If such an overture resulted in FreeCause's software being downloaded (thereby creating revenue for FreeCause), L2T would receive a commission from those gross revenues.

L2T had facilitated an introduction between FreeCause and CBS Sports. CBS Sports and FreeCause thereafter consummated an agreement around 2008 or 2009. L2T alleged that in the first year subsequent to the agreement between FreeCause and CBS Sports, the former's software was downloaded in excess of 160,000 times. Therefore, pursuant to the RPP Agreement, L2T should have received over $500,000 in commissions from the CBS Sports lead alone. L2T alleged that FreeCause had only remitted roughly $50,000 for all of the leads created by its business development and marketing endeavors. Rakuten, a company that coordinates affiliate marketing businesses, purchased FreeCause in 2008.

L2T sued FreeCause and a number of its associated and successor corporations under a spate of causes of action, of which...