## Facts

- The New York Attorney General brought a special proceeding against Direct Revenue, LLC and four principals alleging deceptive distribution of adware that delivered pop-up ads based on users’ web activity.
- The advertising software was often bundled with free programs (e.g., games or screensavers) and could be installed during those downloads.
- Consumers complained that the adware was installed without meaningful consent and was difficult to remove; the Attorney General alleged the company tolerated deceptive installation practices by third-party distributors.
- The Attorney General’s investigation included 29 test transactions involving Direct Revenue or its distributors, including seven tests conducted directly with Direct Revenue.
- In the seven direct transactions, users were presented with a hyperlink and an end-user license agreement (EULA) requiring an affirmative click of “yes” to proceed; when an investigator clicked “no,” no software was installed.
- The EULA disclosed that the software would collect information about websites visited to display advertising, and it included uninstall instructions and limitations of liability.
- In some distributor-initiated installations, the license agreement and uninstall information were not consistently presented before installation.
- Direct Revenue’s distribution contract required distributors to obtain legally valid affirmative consent and make legally necessary disclosures before installation.
- The petition sought broad relief beyond the tested transactions, asserting wrongdoing affecting “millions” of consumers and seeking substantial monetary and equitable remedies, including an accounting and disgorgement.

## Issues

1. Whether the petition stated claims for deceptive practices and related misconduct based on the tested transactions where Direct Revenue obtained affirmative assent through a disclosed EULA.
2. Whether Direct Revenue could be held liable for deceptive or improper installations performed by third-party distributors absent well-pleaded facts showing agency, control, or knowing participation.
3. Whether the petition provided sufficient notice and factual detail to pursue claims and remedies on behalf of “millions” of additional, largely undescribed transactions, including a connection to New York.
4. Whether disgorgement and other expansive monetary remedies were available on the pleadings and claims asserted.

## Decision

- The court granted respondents’ motion to dismiss under CPLR 3211(a)(7) and CPLR 3013 and dismissed the petition in its entirety.
- The court held the seven direct transactions did not plausibly show deception because installation followed clear EULA disclosures and affirmative assent, and declining the EULA prevented installation.
- The court found the petition did not plead sufficient facts to impute distributor misconduct to Direct Revenue, given the contractual requirement that distributors obtain valid consent and provide required disclosures.
- The court concluded the petition’s broad claims regarding “millions” of installations lacked specific factual allegations and adequate New York nexus, failing to provide reasonable notice and to state cognizable claims at that scope.
- The court rejected disgorgement as an appropriate remedy on the pleadings presented.

## Legal Principles

- A pleading must provide reasonable notice of the transactions and conduct at issue; generalized allegations of widespread misconduct without supporting, particularized facts may warrant dismissal.
- Where a consumer is presented with material disclosures and must affirmatively assent to a license agreement as a condition of installation, allegations of nonconsensual or deceptive installation are weakened absent contrary, specific facts.
- A company is not automatically liable for wrongful acts of independent third-party distributors; liability generally requires well-pleaded facts showing agency, control over the manner of performance, or knowing participation in the wrongful conduct.
- Claims seeking sweeping relief for transactions beyond the forum state require factual allegations tying the challenged conduct to the state and the statutes invoked.
- Disgorgement and similar extraordinary monetary remedies are not awarded where the pleaded facts do not support the underlying statutory or equitable predicates for such relief.

## Conclusion

The court dismissed the Attorney General’s petition because the pleaded test transactions did not show deceptive conduct by Direct Revenue’s own consent-based installation flow, the petition did not adequately link third-party distributor misconduct to Direct Revenue through agency or control allegations, and the broad “millions of consumers” theory lacked the factual specificity and New York connection required to state claims and justify expansive remedies.


People v. Direct Revenue, LLC, 19 Misc. 3d 1124(A) (N.Y. Sup. Ct. 2008)