• by Wendy Davis  @wendyndavis, November 3, 2010

Handing a blow to gaming developer Zynga, a judge has denied the company's motion to dismiss a consumer's potential class-action lawsuit about "scam ads" within games.

Zynga argued that the lawsuit, on behalf of game user Rebecca Swift, should be dismissed because the federal Communications Decency Act immunizes Web companies from liability when third parties upload unlawful material, including allegedly fraudulent ads. But the 9th Circuit Court of Appeals ruled two years ago that Web companies aren't entitled to that immunity if they help develop unlawful ads.

U.S. District Court Judge Saundra Brown Armstrong in Oakland, Calif. this week rejected Zynga's bid to dismiss the case because Swift alleged in her complaint that Zynga was responsible for creating the ads. "The cannot determine at this juncture, based on the pleadings, whether Zynga is entitled to immunity," Armstrong wrote in her 16-page ruling.

The decision doesn't mean that Swift will ultimately prevail, but allows her to gather additional evidence from Zynga that can be used at a trial.

Last November, Swift, of Santa Cruz, filed suit against both Facebook and Zynga, which offers apps to Facebook users, for allegedly profiting from scam ads. She says the ads offered people currency for games if they signed up for "free" trial subscriptions, but then prevented people from canceling or obtaining refunds. Swift alleged that she lost around $200 after signing up for a "risk-free" trial of monthly shipments of a green tea supplement in order to earn YoCash -- virtual currency used in the YoVille.

At the time, legal experts predicted that the complaint against both companies would likely be dismissed under the Communications Decency Act because Swift didn't allege specific facts showing that either company helped develop the ads.

Swift dropped the lawsuit against Facebook, but amended her lawsuit against Zynga by asserting that the company took an active role in developing the ads.

Armstrong ruled that Swift's amended papers sufficiently alleged that Zynga contributed to the ads, noting that the complaint asserted that "Zynga designed its games to intentionally create the demand for the virtual currency offered in those games, and then used this demand to lure consumers into the allegedly fraudulent transactions."

In another development in the lawsuit, court records show that in May Harvard professor and Internet advertising expert Ben Edelman joined the team of lawyers representing Swift.