• by Wendy Davis  @wendyndavis, January 4, 2006

An appellate court in California recently handed The New York Times a victory in a breach of contract lawsuit against online advertising company Click2Boost, Inc.

In the decision, issued last week, the appeals court found that the Times was entitled to win a lawsuit for approximately $2 million against Click2Boost and its assignee, Wall Street Network, without going through a trial.

The case stemmed from a pay-for-performance agreement--in effect between May 2002 and September 2003--under which Click2Boost agreed to obtain Times subscribers by advertising online. Click2Boost claimed it provided the Times with 45,000 subscribers in that time, all gleaned through affiliates and partners that collected names and addresses of people who wanted to purchase subscriptions to the paper.

But in fact, only 187 of the subscribers provided by Click2Boost turned out to be paying customers, while a whopping 41 percent of those on the Click2Boost list complained to the Times that they had never signed up for the paper, according to the court opinion.

By the fall of 2003, the Times refused to pay Click2Boost for subscriptions and canceled the contract, prompting the $1.8 million lawsuit. The Times counterclaimed for a refund of money--several hundred thousand dollars--paid to Click2Boost before learning that the subscriptions were invalid.

Click2Boost claimed that the subscriptions were real; otherwise, the company argued, it couldn't have secured people's names and addresses. But Allan Gabriel, a lawyer for the Times, argued that Click2Boost didn't prove that the information was legitimate. "The fact that there's a list of names is not sufficient proof," Gabriel said.

In April, a judge in Los Angeles County Superior Court, James Dunn, ruled against Click2Boost based on the documents and depositions taken in preparation for trial. Click2Boost then asked the judge to reconsider his ruling, arguing that it wanted to present more evidence. Dunn agreed to reconsider his ruling, which led the Times to file its successful appeal.

While the precise facts of this case were unusual, a number of online advertising companies rely on affiliates and subcontractors--which frequently leads to confusion in figuring out who is ultimately responsible for ads. "It becomes a daisy chain that's very difficult to trace," said Gabriel. While this lawsuit didn't appear to involve adware, the use of affiliates is one reason why tracing the origin of pop-up ads served by adware companies can be challenging.

Click2Boost assigned its claims to Wall Street Network, which was represented in court by Arnold G. Regardie, who appears to be affiliated with Click2Boost, and Scott E. Shapiro. Neither lawyer returned telephone calls for this article.

A spokesman for The New York Times did not return telephone calls for this article by press time.