United States District Court, D. Colorado
AIRQUIP, INC., KELLY DASILVA, and NICOLE GRAY, on behalf of themselves and all others similarly situated, Plaintiffs,
HOMEADVISOR, INC., IAC/INTERACTIVECORP, and DOES 1 THROUGH 10, Defendants.
A. BRIMMER, UNITED STATES DISTRICT JUDGE.
matter is before the Court on HomeAdvisor, Inc.'s Partial
Motion to Dismiss Amended Complaint [Docket No. 42] and
IAC/InterActiveCorp's Motion to Dismiss Amended Complaint
[Docket No. 44]. The Court has jurisdiction pursuant to 28
U.S.C. §§ 1331 and 1332(d)(2).
Inc. (“HomeAdvisor”) uses a digital marketplace
to help connect persons providing home improvement services
with homeowners in need of such services. Docket No. 32 at 4,
¶ 1. Plaintiffs Airquip, Inc. (“Airquip”),
Kelly DaSilva, and Nicole Gray are home service
professionals who paid for memberships with HomeAdvisor.
Id. at 13-14, ¶¶ 23-25. As part of these
memberships, HomeAdvisor provided each plaintiff with leads
for new business opportunities. Id. at 4, ¶ 2.
Plaintiffs were required to pay HomeAdvisor a fee for each
lead ranging from $8 to over $90 per lead. Id. at
11, ¶ 16. Plaintiffs claim that HomeAdvisor
misrepresented the quality of its leads and that the leads
are characterized by “wrong or disconnected phone
numbers and contact information; persons who never heard of
HomeAdvisor; stale Leads, including for projects that
Homeowners completed months or years prior to the Lead being
sent; contacts for homes that were listed for sale; and
contacts for vacant or nonexistent residences.”
Id. at 8-9, ¶ 12. On behalf of a nationwide
class of service professionals who used HomeAdvisor's
services, plaintiffs claim that defendants' services were
fraudulent. Id. at 103-107, ¶¶ 256-269.
IAC's Acquisition of HomeAdvisor
(“IAC”) is a media and internet company that owns
more than twenty operating businesses. Id. at 14.
¶ 27. IAC acquires, develops, and spins off media and
internet businesses. Id. at 17, ¶¶ 40-41.
In 2004, IAC acquired ServiceMagic, which it later rebranded
as HomeAdvisor. Id. at 14, ¶ 26.
been the parent company and majority shareholder of
HomeAdvisor since 2004. Id. at 18-19,
¶ 45. IAC executives oversee and direct the
HomeAdvisor business and IAC has made substantial capital
contributions to HomeAdvisor. Id. at 19,
¶¶ 46-47. Since 2012, IAC has repeatedly emphasized
HomeAdvisor's growth opportunities to IAC's
investors. Id. at 20-22, ¶¶ 50-54. In so
doing, IAC executives have touted changes to
HomeAdvisor's subscription services, which are intended
to make HomeAdvisor's revenue generation
“stickier.” Id. at 21, ¶ 53.
increasing its salesforce and modifying its subscription
model, HomeAdvisor has generated exponential year-to-year
growth in revenue and substantially increased the number of
home service professionals who pay for HomeAdvisor's
services. Id. at 23, ¶¶ 56-57.
HomeAdvisor's Business Model
offers a membership model that allows home service
professionals to pay an annual fee to become a
“HomeAdvisorSMPro.” Id. at
25-26, ¶¶ 62-63. The basic membership, “Pro
ReachTM, ” allows home service professionals
to list their services on the HomeAdvisor website.
Id. However, home service professionals can upgrade
to a “Pro ConnectTM” or “Total
ConnectTM” membership, which has a lower
up-front cost and provides home service professionals with
“ProLeadsTM.” The ProLeads service
includes “targeted leads” and “exact match
leads.” Id. at 25-26, ¶ 62. Targeted
leads match home service professionals with “homeowners
who are actively looking for the type of work [the
professional] specialize[s] in.” Id. Exact
match leads are matches with homeowners searching for
services in the professional's area who are interested in
that specific professional. Id. HomeAdvisor's
website describes the leads as “highly targeted,
” coming from “serious homeowners” and
“ready-to-buy” customers. Id. at 29-31,
¶¶ 70-73. According to the website, if a homeowner
requests a referral, HomeAdvisor will refer “up to four
Service Professionals.” Id. at 29-30, ¶
represents to home service professionals that members are
able to manage and monitor the leads sent to them by
HomeAdvisor. Id. at 34, ¶ 79. HomeAdvisor
states that the home service professional is able to set a
budget for leads and select the service types and locations
for his or her leads. Id., ¶ 80.
September 3, 2014, IAC announced that HomeAdvisor had
acquired a majority stake in mHelpDesk, a startup that
offered software services for small to midsize businesses.
Id. at 37, ¶ 89. HomeAdvisor promptly began
making mHelpDesk's services available to HomeAdvisor
members. Id. However, HomeAdvisor did not inform
home service professionals that, if they joined HomeAdvisor,
they would be automatically enrolled in mHelpDesk and charged
for its services after a one-month free trial. Id.
at 38, ¶ 91. HomeAdvisor members were automatically
charged $59.99 -$99.00 a month for mHelpDesk without any
prior authorization. Id. at 39, ¶¶ 93-94.
claim that the manner in which leads are generated is
inconsistent with HomeAdvisor's representations and that
the leads offered by defendants are a sham. Id. at
39-53, ¶¶ 95-127. Plaintiffs allege that
HomeAdvisor relies on three sources for its leads: (1) direct
lead generators, which “are in the business of
generating consumer contact information for a variety of
industries, ” id. at 40, ¶ 98; (2)
partner affiliate networks, which “are businesses that
connect ‘advertisers' like HomeAdvisor with
‘publishers' like bloggers and other businesses;
publishers promote HomeAdvisor on their websites and generate
leads that are then sent to HomeAdvisor in exchange for a
payment to the “publisher, ” id. at
40-41, ¶ 99; (3) home improvement branded affiliates,
which are “established companies and brands  in the
home décor and home improvement business” whose
websites and in-store promotions are used by defendants to
generate leads. Id. at 41, ¶ 100.
allege that “HomeAdvisor conceals the nature and
genesis of its Leads by misrepresenting that Leads are
exclusively generated and vetted through its patented
ProFinderTM and ProLeadsTM
systems.” Id. at 45, ¶ 105. To the
contrary, HomeAdvisor's leads “are the product of
telemarketing, cold-calling, sweepstake entries and other
third-party Lead generation companies and sources used by
Defendants, a far cry from a process that would be designed
and calculated to generate Leads that constitute qualified
project-ready Homeowners.” Id., ¶ 107.
plaintiff describes a similar pattern of paying for sham
leads. Plaintiff Airquip joined HomeAdvisor on or about
September 16, 2015. Id. at 54-55, ¶¶
130-31. Over the course of six months, it received
approximately 180 leads and paid HomeAdvisor $6, 300.
Id. Airquip states that it encountered a number of
issues with the leads including disconnected phone numbers,
leads outside Airquip's service area, stale leads, leads
from non-homeowners, leads from individuals with no
familiarity with HomeAdvisor, and inaccurate lead
information. Id. In addition, Airquip states that it
was charged $59.99 a month for mHelpDesk without being told
that it would be automatically enrolled in the system.
about November 5, 2015, plaintiff DaSilva paid $347.98 for a
HomeAdvisor Pro ConnectTM membership. Id.
at 56, ¶ 135. DaSilva states that she received
approximately twenty-five leads from HomeAdvisor for which
she was charged over $715. Id., ¶ 136. DaSilva
encountered problems with her leads including
“disconnected phone numbers; persons stating that they
were not the Homeowner of the property and were not
interested in the service; Leads for services Plaintiff
DaSilva did not offer; and even a Lead with a fictitious
address.” Id. at 56-57, ¶ 137. DaSilva
stated that the most common deficiency with her leads,
however, was that the homeowners regularly complained that
she was the “tenth or even twentieth
HomeAdvisor Home Service Professional ”
to contact them. Id. (emphasis in original). DaSilva
discovered in April 2016 that she had been charged $59.99 a
month for four months for mHelpDesk. Id. at 58,
¶ 141. DaSilva was not told that she would be enrolled
in mHelpDesk. Id.
Gray signed up for a HomeAdvisor Pro ConnectTM on
or about February 4, 2016. Id. at 58-59, ¶ 144.
Gray encountered deficiencies with the leads including
“disconnected phone numbers, numbers that went to fax
lines and numbers that rang incessantly before
disconnecting.” Id. at 59, ¶ 145. In
total, Gray received over 170 leads and paid HomeAdvisor
approximately $4, 500 for a Pro ConnectTM
membership and leads. Id. at 60, ¶ 148. Gray
was also enrolled in mHelpDesk for $59.99 a month without
prior notice. Id. at 59-60, ¶ 146.
complaint further describes how home service professionals in
California, Connecticut, Maryland, Massachusetts, Minnesota,
Missouri, New Jersey, Ohio, Pennsylvania, Texas, and Virginia
have experienced a range of problems in working with
HomeAdvisor. Id. at 62-73, ¶¶ 153-192.
filed suit on July 19, 2016. Docket No. 1. On November 14,
2016, plaintiffs filed an amended complaint. Docket No. 32.
The amended complaint alleges five causes of action against
all defendants: (1) violations of the Racketeer Influenced
and Corrupt Organizations Act (“RICO”), 18 U.S.C.
§ 1962(c); (2) violations of the Colorado Consumer
Protection Act (“CCPA”), Colo. Rev. Stat. §
6-1-101, et seq.; (3) fraud/fraudulent concealment
under Colorado ...