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State ex rel. Woodridge Local Schools v. Facebook, Inc.

United States District Court, N.D. Ohio, Eastern Division

January 7, 2020

STATE EX REL. WOODRIDGE LOCAL SCHOOLS, et al., Plaintiffs,
v.
FACEBOOK, INC., Defendant.

          ORDER

          JOHN R. ADAMS, UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on the motion of Defendant Facebook, Inc. to dismiss the Amended Complaint of Woodridge Local Schools, Cuyahoga Falls City School District, City of Dayton Public Schools, Logan Hocking Local School District, Springfield City School District, Lake Local School District, Toledo City School District, and Northern Local School District (collectively, “Plaintiffs”). Defendants request dismissal for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1), and for failure to state a claim under Fed R. Civ. P. 12(b)(6). Having considered the parties' arguments, the evidence, and applicable law, the Court hereby ORDERS that the motion to dismiss (Doc. 11) is GRANTED, for the reasons set forth below.

         I. BACKGROUND

         ECOT (the Electronic Classroom of Tomorrow) was a community, or charter, school under Ohio law. Plaintiffs are school districts which had resident students enrolled in ECOT at the time ECOT ceased operations in January of 2018. Plaintiffs allege that in the six years prior to ECOT's closure, ECOT received large amounts of money that otherwise would have been paid to Plaintiffs but for the enrollment of these students in ECOT. Plaintiffs contend that they lost millions of dollars to ECOT during this timeframe. Plaintiffs further allege that educational opportunities, such as additional teachers, were lost by Ohio's public school districts as a result of ECOT's “massive” overbilling of the public.

         Administrative proceedings in 2017 and 2018 determined that ECOT owed money to the State of Ohio for funds it had improperly received. ECOT became insolvent and liquidation proceedings were initiated in January 2018 to preserve its assets. A special master was appointed to handle ECOT's assets, including its potential claims.

         The special master sought court approval to assign claims to the State of Ohio. The court approved the special master's motion for assignment of claims to the State. Subsequently, the same eight school districts that are Plaintiffs here, represented by the same counsel as in this matter, requested an assignment of ECOT's claims arising out of payments made to various entities. The court denied Plaintiffs' motion as it had already assigned ECOT's claims to the State.

         The State of Ohio brought a lawsuit asserting claims relating to ECOT's collapse on August 21, 2018. Plaintiffs attempted to intervene in the action. The court again denied Plaintiffs' attempt to pursue ECOT's claims, finding that the schools' interests were adequately represented by the State.

         Here, Plaintiffs again seek to recover on claims that were assigned to the State. Specifically, Plaintiffs seek to recover from Defendant Facebook funds that ECOT paid to Facebook totaling $92, 903.61 in 2016 and $150, 000.00 in 2017. Facebook allegedly placed ads for ECOT in exchange for these payments. Plaintiffs allege that ECOT made those payments to Defendant without receiving “reasonably equivalent value” under Ohio law.

         Defendant Facebook now has moved to dismiss under Rule 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. The Court turns to the merits of those motions.

         II. LEGAL STANDARDS

         Fed. R. Civ. P. 12(b)(1)

         A party may move to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the case. “When a defendant attacks subject matter jurisdiction under Rule 12(b)(1), the plaintiff must meet the burden of proving jurisdiction.” Cline v. United States, 13 F.Supp.3d 868, 870 (M.D. Tenn. 2014), (citing Golden v. Gorno Bros., Inc., 410 F.3d 879, 881 (6th Cir. 2005)). A motion to dismiss under Fed.R.Civ.P. 12(b)(1) based upon a lack of subject matter jurisdiction is generally presented in two ways, as facial challenges or as factual challenges. Lovely v. United States, 570 F.3d 778, 781-82 (6th Cir. 2009); 2A James W. Moore, Moore's Federal Practice ¶ 12.07 [2.-1], at 12-50 to 12-55 (2d ed. 1996). When a court reviews a complaint pursuant to a factual attack to subject matter jurisdiction, no presumption of truthfulness applies and the court must weigh evidence to arrive at a factual justification for subject matter jurisdiction. See Ohio Nat. Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990). The court has wide discretion to allow affidavits and documents. Id.

         Fed. R. Civ. P. 12(b)(6)

         Federal Rule of Civil Procedure 12(b)(6) permits a court to grant a motion to dismiss when a complaint fails to state a claim upon which relief can be granted. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In deciding a motion to dismiss under Rule 12(b)(6), the court must treat all factual allegations ...


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