Hy Cite Corporation v. Badbusinessbureau.co, et al

Filing 44

Hy Cite Corporation v. Badbusinessbureau.co, et al

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WO

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

a Wiscons i n) ) ) Plaintiff, ) ) ) vs. ) ) badbusin e s s b u r e a u . c om, L.L.C., a St.) K i t t s / N e v i s C o r p o r a t i o n d / b / a) b a d b u s i n e s s b u r e a u . c o m a n d / o r) rip off r ep o rt.com a n d / o r) b a d b u s i n e s s b u r e a u . c o m / R i p - O f f) ) Rep ort .com; ) Xcent ric Ventures, L.L.C., an Arizona) l i m i t e d liabil i t y c o m p a n y d/b/a) b a d b u s i n e s s b u r e a u . c o m a n d / o r) r ip offrep ort.com a n d / o r) b a d b u s i n e s s b u r e a u . c o m / R i p - O f f) ) Rep ort .com; and ) ) Ed M agedson, an Arizona resident, ) ) Defendant s. ) ) H y Cit e Corporation, corp orat ion,

No. CIV 04-2856-PHX-EHC O RDER

Defendant Xcentric Ventures, L.L.C. filed a M ot ion t o D i s m i s s. [Dkt. 19]. Defendant Ed M agedson filed a M ot ion to Dismiss [Dkt. 38]. Those M ot ions are fully briefed. Defendant s Ed M agedson and Xcentric Ventures filed a M o t i on for Partial Reconsiderat i o n . [Dkt. 25]. Pursuant to the Court's Order [Dkt. 26], Plaintiff filed a Resp onse [Dkt. 31] and Defendants filed a Reply [Dkt. 34]. //

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Facts Alleged in Plaintiff's Amended Complaint D efendant Ed M agedson manages Defendant Xcentric Ventures (Defendants). Defendant s operate a website known as the Rip-off Report.1 The website proclaims itself as "a worldwide consumer reporting Website & Publication, by consumers, for consumers, t o file & document complaints about Comp anies or Individuals who ripoff consumers." [Dkt . 7, ex. A, p. 1]. The websit e claims t o contain reports on "over 1,000 different Topics & Categories." [Dkt, 7, ex. A, p. 1]. The website allows users t o p o s t and view complaints, so called "Rip - o ff Reports," about businesses. Website users may also post comments or suggest ions on complaints other users have posted. The website instructs its users that comp laint s may be used as negotiating tools with businesses. Specifically, the website st at es that a user may file a Rip-off Report detailing a complaint w i t h a business, provide t he bus iness with notice of the Rip-off Report and advise the business that the user will up dat e the Rip-off Report to include positive information about t h e business if the business resolves the user's complaint. [D k t . 7, ex. A, p. 4]. The website states that media at t ent ion may follow the filing of a Rip-off Report. The website gives law y ers and potential p laint iffs instructions concerning how to use the information on the website to organize and file class action lawsuits. [Dkt. 7, ex. A, pp. 2, 4-5]. Defendants encourage users who want to do more than simp l y post complaints to become "Rip-off Rep o r t e r s . " A Rip-off Reporter answers the public's "need [for] heroes and heroines, w h o w [ i ll] expose bad business and get them to clean up their act." [Dkt. 7, ex. C, p. 1]. Defendants outline the questions a Rip-off Reporter should investigate, and invit e Rip-off Reporters to contact Defendant s with questions about investigating businesses. Rip-off Reporters are als o encouraged to provide their names when posting on the website, which is otherwise done anony m o u s l y . Rip-off Reporters are not normally comp ensat ed, but according to Defendants' website "once we see your work over a p e r i o d

The Rip-Off Rep o rt website is located at the domain names www.ripoffreport.com and www.badbusinessbureau.com. -2Filed 12/27/2005

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of time, we fee (s i c ) [words missing in original] honest and dedicated, and depending on t he region you're in you will be considered for compensation." [Dkt. 7, ex. C, p. 2]. The websit e includes a tab containing information for those w h o w i s h to volunteer for the Ripoff Report. According to Plaintiff's Amended Complaint , D e f endant s contribute material to the websit e. [Dkt. 7, pp. 6-7]. Defendants "produce original content contained in the Rip-Off Rep ort s."2 [Dkt. 7, p. 6]. Defendants produce editorials and creat e titles to the Rip-off

Rep ort s posted by us ers of the website. Defendants exercise editorial control over the websit e. Defendants use the website to solicit donations and sell the book, "Rip-Off Rep ort .com Do-It-Yourself Guide: How to get Rip-off Revenge." Plaint iff sells dinnerware and cookware under the trademarked name "Royal Prest ige." On November 17, 2004, the Rip-off Report website included 35 Rip-off Reports involving Royal Prestige. Those reports detail various complaints about Plaintiff's business, including their sales tactics, misleading promotional offers, the quality of the dinnerware and cookware, and Plaintiff's refusal to abide by the terms of its sales contracts. [Dkt . 7, ex. G]. Plaintiff alleges that those reports contain "negative, fals e , mis l eading, and defamat ory s t a t e m e n t s." For example, the website contains the statements: "Royal Prest ige- Hy-Cite (sic) Liars, Thieves, Criminals ; " "Hy-Cite (sic) was fined by several AGS around the country for their former scare tactics of telling people they would D I E if t h e y cooked in any other cookware;" "Royal Prestige ripoff Contract is not valid for cancelation (sic)... I realized this was a crooked company ; " and "Royal Prestige- Hy Cite Corporation rip off and deceitful sales tactics." [Dkt. 7, p. 11]. Concerned with the complaints and s t a t ement s appearing on the Rip-off Report web s i t e , P laint iff, through counsel, sent letters to the website on April 16, 2003 and April

Plaintiff does not des c r i b e specifically what original content Defendants produced. T he exhibits attached to the Amended Complaint contain an Internet posting claiming that Defenda n t M a ge d s on posted a complaint on the Rip-off Report website using another p erson's name and address. [Dkt. 7, ex. K, p. 4]. -3Filed 12/27/2005

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30, 2003, informing Defendants that they were publishing defamatory material and misusing Plaint iff's trademark. [Dkt. 7, p. 11]. O n April 17, 2003 and M ay 28, 2003, Defendants' websit e, through counsel, responded in letters, directing P l a int iff to a mediation "program b y w hich it has assisted several companies in resolving complaints and has posted rep o r t s on the website praising the companies for t h eir cooperation and excellent customer service." [Dkt. 7, ex. I, p . 1]. The letter instructed Plaintiff that if it was interested in the p rogram, it should send a e-mail to the editor of t h e Rip -off Report website. Plaintiff did so. On July 11, 2003, after Plaintiff and Defendant M agedson had exchanged a series of e-mails, Defendant M agedson described the mediation program and its cost. Under the p rogram, Defendants would e-mail "all the consumers who feel they were victimiz e d, st at ing that they will get a full refund plus a min[imum] of 5% more for t heir inconvenience exp lain i ng (something to the effect of) management did not realize this was going on, and t hey are glad (as we discussed by phone) that these Rip-off Reports were there to let them know of the problems." [Dkt. 7, ex. J, p. 1 (p a r e n t h e t i c a l statements in original)]. Once a u s e r 's complaint reported in a Rip-off Report was resolved, Defendants would update t h e Rip -off Rep o r t and its title to show the complaint was resolved. If a user did not respond t o Defendants' e-mail, Defendants would update the Report to "reflect H y Cit e s (sic) willingness to satisfy this customer, but apparently they eit h e r filed a bogus Report, or t hey are a disgruntled employee, a competitor (sic) etc, what ever (sic) our findings, with some assistance from y o u , as to the possibilities of why they did not respond, the Report will reflect that and will definitely put you in a good light" [Dkt. 7, ex. J, p. 2]. D e f e n d a n t s would add to each Rip-off Report a link to a st a t e ment , written by Plaintiff, explaining the st ep s it took to resolve the complaint. Before Defendants would e-mail the users who filed Rip-off Reports, Plaintiff would have to s end a $30,000 check. Plaintiff would also have to provide Defendants with a st at ement explaining the reasons for the complaints. Defendants would then "evaluate y our statement, to see if we can work with it to make this program work." [D k t . 7, ex. J, p.

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2]. Once all the Rep o r t s were updated, Plaintiff would be required to provide another $20,000. Thereafter, Plaintiff would be required to pay a $1,500 monthly retainer, in exchange for Defendant notifying Plaintiff of any complaints, as long as there were no more t han four per month, and giving Plaintiff an opportunity to resolve the complaints before allowing any new Rip-off Reports against Plaintiff to be posted. [Dkt. 7, ex. J, p. 3]. Procedural History On January 18, 2005, Plaintiff filed an Amended Complaint, alleging ten counts . [D k t . 7]. The Amended Complaint names badbusinessbureau.com, L.L.C., Xcentric Ventures, L. L. C . and Ed M a ge d s o n as D ef en d an t s . T he docket indicates t h at

badbusinessbureau.com, L.L.C. has not been served and has not entered an ap p e a r a n ce in this case. On M arch 13, 2005, Plaintiff filed a M ot ion for Alternat ive Service on Defendant M agedson. [Dkt. 13]. Plaintiff alleged that it had unsuccessfully attempted to serve Defendan t M a gedson at his last known residence and had watched his post office box fr o m February 16, 2005 to M arch 9, 2005, but had not seen Defendant M agedson. Plaintiff did not allege that it had sent a waiver of service request to Defendant M agedson's residence or his post office box. On A p r i l 19, 2005, the Court ordered Defense Counsel to accep t service on D e f endant M agedson's behalf and ordered Defendant M agedson to pay Plaint iff's costs incurred as a result of his avoidance of service. [Dkt. 24]. Defendant M agedson has been served [Dkt. 32], as has Defendant Xcentric Ventures [Dkt. 27]. Motions to Dismiss Defendant s Xcentric Ventures [Dkt. 19] and M agedson [Dkt. 38] filed M ot ions to Dismiss. Those M ot ions to Dismiss are entirely ident i c a l , with the exceptions that

Defendant M agedson's M ot ion adds an argument that Plaintiff does not adequately plead wire fraud and dis c u s s e s a recent Ninth Circuit decision, Bosley M ed. Inst., Inc. v. Kremer, 4 0 3 F.3d 672 (9th Cir. 2005). Defendant Xcentric Ventures filed a Notice of Supplement a l

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Aut horit y regarding Bos l e y M edical. [Dkt. 20]. The Court, therefore, will consider the M ot ions together. Legal S tandard A court may dis m i s s a complaint "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002) (citation omitted). All material allegations of the comp laint must be accepted as true and in a light most favorable to Plaintiff. In re Broderbund/Learning Co. Securities Litigation, 294 F.3d 1201, 1203 (9th Cir. 2002). A. Immuni ty Pursuant to the Communications Decency Act Defendant s argue that Count s Three through Eight and Count Ten of Plaintiff's Amended Complaint are barred by the Communications Decency Act (CDA), 47 U.S.C. § 230. The CDA p r o v i d e s that "no provider or user of an interactive computer service shall be treated as the publisher or s p e a k e r of any information provided by another information cont ent provider." 47 U.S.C. § 230(c)(1). The phrase "interactive computer s e r v ice is defined as "any information service, system, or access software provider that p r o v ides or enables computer access to the Internet and such systems operated or services offered by li b r a r i e s or educational institutions." 47 U.S.C. § 230 (f)(2). The phrase "information content p rovider" is defined as "any p e r s o n or entity that is responsible, in whole or in part, for the creat ion or development of information provided through t h e Internet or any other int eract ive computer service." 47 U.S.C. § 230 (f)(3). In enacting the CDA, "Congress granted most Internet services immunit y from liabilit y for publishing false or defamat o ry material so long as the information was provided by another party. As a result, Internet publishers are treated differently from corresponding p u b l i s hers in print, television and radio." Carafano v. M et rosp lash.com, Inc., 339 F.3d 1119, 1122 (9th Cir. 2003). Congress found Internet services and publishers deserving of this favorable treatment because the Internet has flourished "with a minimum of government regulat ion," and has become "a forum for a true diversity of political discourse, unique

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op p ort unit i e s for cultural development, and myriad avenues for intellectual activity." 47 U.S.C. § 230 (a)(4) & (5). B a s e d on Congress' findings, "reviewing courts have treated § 230(c) immunity as quit e robust."3 Carafano, 339 F.3d at 1123 (citing cases). The Ninth Circuit has is sued two decisions addressing claims of § 230(c) immunity. Both of those cases turned on whether t he defendants were "information content providers" of t h e allegedly wrongful content p ost ed on their websites. In Carafano, the Court held that the defendant, a computer match-making service, was immune from liabilit y for false content in a dating profile posted on the defendant's websit e because the critical information was provided by a third party and the defendant t ransmit t ed the information without alteration. 339 F.3d at 1125. The informat ion given in t he dat i n g p r ofile was formulated in response to the defendant's questionnaire, which the defendant used to gather standariz e d information for the dating profiles it posted on its websit e. The Court concluded that soliciting data through a questionnaire did not const it ut e "a s i gnificant role in creating, developing or 'transforming' the relevant informat ion." Ibid. In another case, the Court considered whether § 230(c) immunity applied to the defendant operator of an electronic newsletter who p u b l i shed in the newsletter an allegedly defamat ory e-mail sent to him by a third party. Batzel v. Smith, 333 F.3d 1018, 1021 (9th Cir. 2003). In t h a t case, the Court found that the defendant's website and electronic newsletter fi t "the broad statutory definition of 'interactive computer service.'" Id., 333 F.3d 1030. The Court stated that "the pertinent question is whether [t h e t h i rd party] was the sole content p rovider of his e-mail, or whether [the defendant] can also be cons i d e r e d to have

A commentator has argued that § 230(c) immunity should be narrowly construed because in enacting the CDA Congress did not consider the potential harms t o the s u b j e c t s of false or defamatory material posted on the Internet. Susan Freiwald, Comp arat ive Institutional A n a l y sis in Cyberspace: The Case of Intermediary Liability for Defamat ion, 14 Harv. J.L. & Tech. 569, 631-42 (2001). -7Filed 12/27/2005

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"crea t [ e d ] " or "develop[ed]" [the third party's] e-mail message." Id., 333 F.3d at 1031. The Court found that the defendant was not a cont e n t p r o v i der because he "did no more than select and make minor alterations to [the third party's] e-mail." Ibid. The Court, however, r e m a n d e d the case to determine whether the allegedly defamatory e-mail was "provided by anot her information content provider" because the sender of the e-mail maintained that he did not send the e-mail intending it for publication on the Internet. Id., 333 F.3d at 1032. T u r n i n g to this case, Defendants are alleged to be "provider[s]... of an interact i v e comp ut er service." See 47 U.S.C. § 230(c). Plaintiff alleges that Defendants operate a websit e known as the Rip-off Report and that persons using the Internet have access to t he website. See 47 U.S.C. § 230(f)(2). Persons acces s ing the website may view so-called R i p -off Reports, make comments on those Reports, or post their own Rip-off Reports. A s in Carafano and Batzel, t he pertinent question is whether users posting on Defendants' websit e are the sole providers of the allegedly wrongful content, or whether Defendants c a n be considered to have created or developed any of the allegedly wrongful cont e n t p ost ed on the Rip-off Report website. Defendant s argue that they did not create or develop any of t h e allegedly wrongful cont ent , although they provided other content on the Rip-off Report website, because the allegedly wrongful content appears in Rip-off Reports authored by users access i ng the

websit e. This argument ignores Plaintiff's allegations that wrongful cont e n t appears on the Rip -off Report website in editorial comments created by Defendants and titles to Rip-off Rep ort s, which Defendants allegedly provide. M oreov e r, Plaintiffs allege that Defendants "p roduce original content contained in the Rip-off Rep ort s." Plaintiffs further allege that Defendant s "solicit individuals to submit reports with the promise that individuals may ult imat ely be compensated for their rep o r t s . " These allegations arguably could support a finding that Defendants are "respons ible... for the creation or development of information" p rovided by individuals submitting Rip-off Reports in resp o n s e t o Defendants' solicitation.

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See 47 U . S.C. § 20(f)(3). Taking Plaintiff's allegations as true, In re Broderbund, 294 F.3d at 1203, Defendants are not entitled t o immunity under the CDA at this stage of the case. B. Racke te e r Influenced and Corrupt Organizations Act (RICO) Count s One and Two allege violat i o n s of RICO, which makes it "unlawful for any p erson employed by or associat e d w i t h any enterprise engaged in, or the activities of which affect, interst at e or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity." 18 U.S.C. § 1962(c). "Racketeering activity" includes extortion, both actual or threatened, and wire fraud. 18 U.S.C. § 1961(1)(A ) & (B). To show a "pattern of racketeering activity" a p laint iff must show at least two racket e e ring acts. 18 U.S.C. § 1961(5), Sedima v. Imrex Co., 473 U.S. 479, 496, n. 14 (1985) ("while two acts are neces sary , they may noy be sufficient"). Si m p ly stated, "RICO prohibits engaging in a pattern of 'racketeering activity,' defined as violat ing certain laws; as such, a predicate illegal act must be alleged." M endoz a v. Zirkle Fruit Co., 301 F.3d 1163, 1168 (9th Cir. 2002) (citation omitted). In this case, Plaintiff alleges t hreat ened extortion and wire fraud. 1. Pre di cate Acts: Threatened Extortion and Wire Fraud

In defining extortion, the RICO statute refers to 18 U.S.C. § 1951, which in subsect ion (b)(2) defines extortion as "the obtaining of property from another, with his consent , induced by wrongful use of act u a l or threatened force, violence, or fear." Obt aining property by threatening economic los s can constitute extortion if the person making the threat does not have a right to the property. See, e.g., United States v. Katter, 840 F.2d 118, 122-24 (1st Cir. 1988) (threat to defame if money owed under a contract was not paid constituted extortion), United States v. Cerilli, 603 F . 2 d 415, 418-19 (3d Cir. 1979) (grant of government cont ract s conditioned on making political contributions was

ext ort ion), but see Rothman v. Vedder Park M gmt ., 912 F.2d 315, 318 (9t h Cir. 1990) (no ext ort ion where defendants threatened to raise rent becaus e , as landlords, they had a right t o raise rent ). Here, Defendants argue that Plaintiff does not properly allege threatened

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ext ort ion because Defendants conduct, as alleged, is "nothing more than an offer to p rovide services for compensation;" and thus there is no allegation of a wrongful threat of economic loss. [Dkt. 38, p. 12]. In the Amended Complaint, Plaintiff alleges that Defendants solicit and create Ripoff Reports with "negative, mis l e ading, false, and defamatory content." [Dkt. 7, p. 2]. Plaint iff further alleges that Defendant s will only remove or modify those wrongful reports if paid a fee of $50,000 and a monthly ret a i n e r of $1,500. Stated in full, Plaintiff alleges that, a f t e r receiving a $30,000 check, Defendants would contact users who filed Rip-off Reports agai n s t Plaintiff with an offer that Plaintiff would refund their money paid to Plaintiff plus five percent. Defendants would then update the Rip-off Report and its title to show that t he complaint was resolved. Plaintiff further alleges that if t h e aut h o r of a Rip-off Report did not resp o n d t o Defendant's e-mail, Defendants would update the Report to "reflect Hy Cit es (sic) willingness to s a t i s f y t his customer, but apparently they either filed a bogus Rep ort , or they are a disgruntled employee, a competitor (sic) et c , what ever (sic) our findings, with some as s i s t a n c e from you, as to the possibilities of why they did not resp ond, the Report will reflect that and will definitely put you in a good light " [D k t . 7, ex. J, p. 2]. Plaintiff alleges that in exchange for the $30,000 check, Defendant would also

include a link to a s t a t e m e n t , w r it t en by Plaintiff, explaining the steps it took to resolve the comp laint . Plaintiff alleges that it would be required to provide another $20,000 once all the Rip -off Reports agains t P l a i nt iff were updated. Plaintiff further alleges that Defendants wou l d require Plaintiff to pay a $1,500 monthly retainer, in exchange for Defendant not ify ing Plaintiff of any new complaints and giving Plaintiff an opportunity to resolve the comp laint s before allowing any new Rip-off Reports against Plaintiff to be pos t e d. [Dkt. 7, ex. J, p. 3]. Plaintiff alleges that Defendants have threatened other businesses with this scheme. T hose allegations of Defendants' conduct distinguishes this case from Rothman. T here, the defendants owned and op e r at ed a mobile home park. As landlords, the

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defendant s had the right to set the price of rent in the park. Because the defendants had t he right to raise the rent, it w a s not unlawful for them to threaten raising the rent for t enant s who refused to enter a lease agreement. Id., 912 F.2d at 318. H e r e , D efendant s op erat e a website. Plaintiff alleges that Defendants create and solicit false and defamatory comp laint s against businesses, but will cease this conduct for a $50,000 fee and $1,500 mont hly retainer. Remedying the publication of false and defamatory complaints, which Defendant s allegedly created and solicited, does not give Defendant s the right to collect fees. See K a t t e r , 840 F.2d at 122-24 (RICO claim allowed where the defendant threatened defamat ion if not paid money, even though the plaintiff owed the defendant money under a contract). Plaintiff has properly alleged threatened extortion. Plaint if f has also properly alleged wire fraud. Wire fraud occurs when a person "(1) d e v i s e d or intending to devise any scheme or artifice... for obtaining money... by means of false or fraudulent pretenses, representations or promises, (2) transmits or causes to be t ransmit t ed by means of wire... any writings... for the purp o s e of executing such scheme or artifice." 18 U.S.C. § 1343 (numbers added). As discussed above, Plaint i f f alleges that Defendan t s intentionally used their website as a scheme to obtain money from Plaintiff and ot her businesses by means of false and defamatory complaints created and solicited by Defendant s. Plaintiff also alleges that Defendants posted fals e and defamatory complaints and s e n t e-mails requesting that Plaintiff pay a $50,000 fee and $1,500 monthly retainer before Defendants would take any action related t o the materials on the website. Both p ost ing complaints on the website and sending e-mails requires transmitting writings by means of wire. See United States v. Pirello, 255 F.3d 728, 729 (9th Cir. 2001) (affirming sent ence imposed after the defendant "pled guilty to using the Internet to commit wire fraud in violation of 18 U.S.C. § 1343"). 2. Injury Actionable under RICO

RICO provides a civil action for "any p e r son injured in his business or property by reason of" a p a t t ern of racketeering activity. 18 U.S.C. § 1964(c). Defendants argue that

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Plaint iff has not alleged injury to business or property and that any injury alleged by Plaint iff was caused by users of Defendants' website, racket eering activity. Plaint iff alleges t h a t it has lost customers, that customers have rescinded sales cont ract s, and t hat Plaintiff's reputation has been injured as a result of the contents of Defendant s' website. Plaintiff further alleges that us e r s of Defendants' website have exp ressly stated on the website that they withheld busines s from Plaintiff after viewing the w e bsit e. That allegation distinguishes this case from Imagineering, Inc. v. Kiewit Pacific Co., 976 F.2d 1303, 1309-12 (9th Cir. 1992), where the plaintiffs alleged only speculative injuries, having failed to allege any specific bids they lost due to t h e defendants' racket eering activity. In determining whether an injury is to "business or p rop ert y " as not by Defendants' alleged

used in 18 U.S.C. § 1964(c), the Court will look to state law. See Diaz v. Gates, 420 F.3d 897, 899 (9th Cir. 2005) (en banc) (in the RICO cont e xt , "we typically look to state law to det ermine whet her a particular interest amounts to property"(quotation omitted)).

Int erference with contractual relationships is actionable in Arizona, Safeway Ins . Co. v. Guerrero, 106 P . 3 d 1020, 1025, __ Ariz. __ (2005) (insurance company did not have a claim for interference with contract against attorney rep r e s e n t i n g an opposing party in other lit igat ion), as is interference with a business relationship, Antwerp Diamond Exch. v. Better Business Bureau, 637 P.2d 733, 740, 130 Ariz. 523, 529 (1981)(disapproved on unrelated grounds in Dun & Bradstreet, Inc. v. Greenmos s Builders, Inc., 472 U.S. 749, 753, n. 1 (1985)) ("dampening sales or other business transaction" w as cognizable injury). Damage t o reputation is compensable under those causes of action. REST A T EM ENT (SECOND) OF T O R T S, § 774A(1)(c) (1979). As alleged, Plaintiff's injuries are to their "business or p rop ert y ." Plaintiff's injuries, as alleged, were caused by Defendants racketeering activity. Plaint iff alleges that Defendant intentionally used its webs i t e as a scheme to obtain money from Plaintiff and other businesses. Plaintiff alleges that Defendant s did so by creating and

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solicit ing cont e n t injurious to Plaintiff's business and offering to alter the content to p ort ray Plaintiff in a good light if Plaintiff payed a $50,000 fee and $1,500 monthly retainer. C. The Lanham Act T he Lanham Act, 15 U.S.C. §§ 1051 et seq., "is designed to protect consumers who have formed particular associat i o n s w i t h a mark from buying a competing product using t he same or substantially similar mark and to allow t h e mark holder to distinguish his p roduct from that of his rivals." Bosley M ed. Inst., Inc. v. Kremer, 403 F.3d 672, 676 (9th Cir. 2005). To state a Lanham Act claim, Plaintiff must allege that it has suffered a competitive injury . See Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 734 (9th Cir. 1999) (seeking to divert business from p l aint iff to defendant was competitive injury alleged t o support false advertising claim). In contradistinction, making a false representation for a purpose other than comp e t it ion is not actionable under the Lanham Act, otherwise the Lanham Act would create a federal tort of mis rep resent at ion. Bosley M edical, 403 F.3d at 679-80 (no Lanham Act claim because defendant's "use of the [plaintiff's] mark simply cannot mislead consumers into buying a competing product"), Halicki v. United Artists Communicat ions , Inc., 812 F.2d 1213, 1214 (9th Cir. 1987) (no Lanham Act claim for false advert ising where movie theaters advert i s e d a movie rated R although it was actually rated P G ). In this case, Plaintiff alleges that the statements on Defendants' website concerning Plaint iff's dinnerware, cookware, and business practices constitute unfair competition, false advert ising and disparagement (Counts Six through Eight) in violation of the Lanham Act. Plaint iff alleges that it suffered a competitive injury becaus e those statements "are used t o promote goods and services sold by D efendant s." [Dkt. 7, p. 23]. The only goods of Defendant s mentioned in the Amended Complaint are Defendants' book, "Rip-Off Rep ort .com Do-It-Yourself Guide: How to get Rip-off Revenge." [Dkt. 7, p. 6]. T h e only services mentioned in the Amended Complaint are the mediation program- where

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Defendant s update the content of the Rip-Off Reports to portray businesses in a good light - which Plaintiff alleges is an extortionate scheme. [Dkt. 7, p. 15]. T he situation Plaintiff alleges differs from Coastal Abstract, 173 F . 3 d at 734, because Pla i n t i ff's business selling dinnerware and cookware cannot be diverted to Defendants, whose business is criticizing ot h e r businesses. In Coastal Abstract, an officer of the defendant title company argued that he could not be liable "under the Lanham Act because he, as an individual, is not in competition with [the plaint i f f ] Coas t al," an escrow agency. I b i d . The Court found the defendant corporation's officer could be liable under the Lanham Act because he "sought by his s t a t e ment s to divert business from [the plaintiff] Coastal t o [the defendant] First American," t hereby causing plaintiff a competitive injury. Ibid. In t his case, Plaintiff's injuries as a result of Defendants' website are not competitive injuries because sales of dinnerware and cookware cannot be diverted to sales of Defendants' book or remediation program. T h e situation alleged in this case is akin to that presented in Bosley M edical, 403 F.3d at 674, where the defendant created a website to publicize his complaints about the p laint iff's business and t o strengthen his negotiating position with the plaintiff. The p laint iff in that case argued that its allegations of extortion and preventing "users from obt aining the plaintiff's goods and services" sufficed under the Lanham Act. Id., 403 F.3d at 678-80. The Court held that the defendant's activities did not constitute actionable conduct under the Lanham Act. Although Plaintiff in this case alleges Lanham Act claims for unfair competition, false advertis ing and disparagement, while Bosley M edical involved Lanham Act claims for trademark infringement and dilution, the holding in Bos l e y M e d i cal was not bas e d on t h e p art icularit ies of those claims, but on the purposes of the Lanham Act . The Court stated: T he dangers that the Lanham Act was designed to address are simply not at issue in this case. The Lanham Act, expressly enacted to be applied in commercial contexts, does not prohibit all unauthorized uses of a t rademark. [The defendant] Kremer's use of the [plaintiff's] Bosley M edical mark simply cannot mislead consumers into buying a competing product - 14 Filed 12/27/2005

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- no customer will mistakenly purchase a hair replacement service from Kremer under the belief that the service is being offered by [the plaintiff] Bosley . Neither is Kremer capitalizing on the good will Bosley has created in its mark. Any harm to Bosley arises not from a competitor's sale of a similar product under Bosley's mark, but from Kremer's criticism of their services. Bosley cannot use the Lanham Act either as a shield from Kremer's criticism, or as a sword to shut Kremer up. Id., 403 F.3d at 679-80. Similarly , in t h i s case no one will mistakenly purchase cookware or dinnerware from Defendants in the mistaken belief that it is Plaintiff's cookware or dinnerware. The criticism of Plaintiff's business appearing on Defendants' website is not a competitive injury actionable under the Lanham Act. D. Common Law Trademark Infringement and Unfair Competition Defendant s argue that Count Nine alleging common law trademark infringement and unfair competition must be dismissed because Plaintiff has not alleged that the appearance of Plaintiff's mark on Defendant s ' website is likely to cause confusion as to Plaintiff's relat ionship with the website. The "likelihood of confusion" standard is found in the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), and in common law unfair competition, see REST AT EM ENT (T H I R D) OF UNFAIR COM PET IT ION, § 2 (1995) ("likely to deceive or mi s lead"). Common law unfair competition, however, is broader than the Lanham Act because the common law imposes liability for a false or misleading representation that "is t o t h e likely commercial detriment of another." RESTATEM ENT (THIRD) OF UNFAIR COM PET IT ION, § 2. As previous ly mentioned, the Amended Complaint alleges that Defendant s' website contains fals e and defamatory statements which have injured

Plaint iff's business. Plaintiff has alleged common law unfair competition. Motion for Partial Reconsideration On April 19, 2005, the Court ordered alt e r nat ive service on Defendant M agedson and ordered that "Defendant M agedson shall pay Plaintiff all cos t s and fees incurred as a result of Defendant M agedson's avoidance of Service of Process." [Dkt. 24, p. 2]. Defendant s filed a M ot ion for Partial Reconsideration [Dkt. 25] of the portion of the Order requiring Defendant M agedson to pay Plaintiff's costs and fees. - 15 Filed 12/27/2005

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"[A] motion for reconsideration should not be granted, absent highly unusual circumst ances, unless the district court is presented with newly discovered evidence, commit t ed clear error, or if there is an intervening change in t h e controlling law." 389 O r a n ge Street Partners v. Arnold, 179 F.3d 656, 665 (9th Cir. 1999) (no clear error w h e r e dist rict court did not redesignate a cross-claim as an affirmative defense because party did not raise the issue until after grant of summary judgment). Defendants argue that Defendant M agedson should not be required to pay Plaint iff's costs and fees incurred as a result of his avoidance of service of p r ocess because Plaint iff did not send him a waiver of service pursuant to Fed. R. Civ. P. 4(d). The Federal Rules of Civil Procedure impose a duty on certain defendant s "to avoid unnecessary costs of serving the summons." Fed. R. Civ. P. 4(d)(2). That duty is only imp o s e d on a defendant "t hat receives notice of an action in the manner provided in this paragraph," which is by mailing a notice of the action and a "request that the defendant w a ive service of a summons." Ibid. If a defendant fails to waive the service of a s ummons, "the court shall i m p o se the costs subsequently incurred in effecting service on the defendant unless good cause for the failure be shown." Fed. R. Civ. P. 4(d). Plaint i f f does not argue that Defendant M agedson failed to waive the service of a summons and that Plaintiff was awarded its costs and fees based on the failure to waive service. Plaintiff argues the Court properly required Defendant M agedson to pay its costs and fees as an exercise of t h e Court's inherent power to sanction parties to litigation. Plaint iff further argues a sanction is proper in this case because Defendant M agedson avoided service of process, indicating that a request for w a i v e r of service would have been fut ile. Plaint iff fails to point to any authority- and the Court can find no authority- for the p rop osit ion t h a t the alleged futility of requesting a waiver of service justifies shifting the cost s and fees of the service of process. Neither is there any reason Plaint i f f could not have mailed a waiver of service reques t t o D efendant M agedson. Plaintiff had Defendant

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M agedson's post office box address, a proper address for sending a waiver of service request . Compare Fed. R. Civ. P. 4(d)(2)(A) (waiver of service request "shall be addressed direct ly to the defendant") with Fed. R. Civ. P. 4(e)(2) (s u m m o n s and complaint shall be served personally or "at the individual's dwelling house or usual place of abode"). P laint iff had Defendant M agedson's last known residential addres s . [Dkt. 17]. Defendant

M agedson represented that residential address on his application for a post office box, which requires him to immediately update his residential address up o n a change. Plaintiff mailed the Summons, Complaint, and Court Order authorizing alternative service to that resident ial address in satisfaction of Ariz. R. Civ. P. 4.1(m) (allowing alternative service, but requiring summons and pleading to be sent to last known residence of t h e person to be served). Becaus e Plaintiff did not mail a waiver of service to Defendant M agedson as r e quired under Fed. R. Civ. P. 4(d), it was clear error to require Defendant M agedso n t o p a y Plaint iff's costs and fees incurred as a result of Defendant M a ge dson's avoidance of service of process. Accordingly , IT IS ORDERED that Defendant Xcentric Ventures, L.L.C.'s M ot ion to Dismiss [Dkt. 19] is GRANTED IN PART and DENIED IN PART; IT IS FURTHER ORDERED that Defendant Ed M agedson's M ot ion to Dismiss [Dkt . 38] is GRANTED IN PART and DENIED IN PART; IT IS FURTHER ORDERED that Counts Six, Seven and Eight of Plaintiff's Amended Comp laint are DIS MIS S ED for failure to state a claim upon which relief can be granted. IT IS FURTHER ORDERED that Defendant ' s M ot ion for Partial Reconsideration [Dkt . 25] is GRANTED; // // // //

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IT IS FURTHER ORDERED that Defendant Ed M age d s o n shall not be required to p ay Plaintiff all costs and fees incurred as a result of Defendant Ed M agedson's avoidance of Service of Process. DATED this 27th day of December, 2005.

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