Swiss America Trading Corporation v. Regal Assets LLC et al

Filing 49

ORDER DENYING MOTION TO DISMISS IN PART AND GRANTING IN PART #22 by Judge Dean D. Pregerson: Defendants Motion to Dismiss is DENIED, in part and GRANTED, in part. Plaintiffs claim for intentional interference with prospective economic advantage is dismissed with leave to amend. Any amended complaint shall befiled within ten days of the date of this Order. In all other respects, Defendants motion is DENIED. (lc)

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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SWISS AMERICA TRADING
CORPORATION,

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Plaintiff,
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v.
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REGAL ASSETS, LLC; TYLER
GALLAGHER, AN INDIVIDUAL;
KELLY FELIX, AN INDIVIDUAL,

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Defendants.
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___________________________

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Case No. CV 14-04960 DDP (ASx)
ORDER DENYING MOTION TO DISMISS
IN PART AND GRANTING IN PART
[Dkt. 22]

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Presently before the court is Defendants Regal Assets, LLC

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(“Regal”) and Tyler Gallagher (“Gallgher,” collectively,

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“Defendants)’s Motion to Dismiss.

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submissions of the parties and heard oral argument, the court

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denies the motion and adopts the following order.

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I.

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Having considered the

Background
Plaintiff Swiss America Trading Corporation (“Plaintiff” or

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“Swiss”) competes with Defendant Regal in the field of precious

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metal sales.

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///

(Complaint ¶ 1.)

Plaintiff promotes itself online

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and relies upon internet reviews and recommendations to generate

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business, as does Regal.

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(Id. ¶¶ 19, 24.)

Swiss alleges that Defendant Regal operates an affiliate

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marketing program, through which paid affiliates promote Regal on

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affiliates’ websites.

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efforts include both advertisements and reviews.

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Complaint alleges, however, that Regal owns, operates, or otherwise

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controls its affiliates’ websites, which include ostensibly

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independent consumer reviews that disparage Swiss, make false

(Compl. ¶¶ 22, 25.)

Affiliates’ promotional
(Id. ¶ 22.)

The

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statements, including completely fabricated reviewer identities and

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credentials, and recommend Regal over Swiss.

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(Id. ¶¶ 25-34.)

The Complaint alleges causes of action for false and

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misleading advertising under the Lanham Act, 15 U.S.C. 1125(a), and

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state law, as well as state law causes of action for unfair

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competition, trade libel, and intentional interference with

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prospective economic advantage.

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II.

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Defendants now move to dismiss.

Legal Standard
A complaint will survive a motion to dismiss when it contains

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“sufficient factual matter, accepted as true, to state a claim to

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relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S.

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662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,

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570 (2007)).

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“accept as true all allegations of material fact and must construe

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those facts in the light most favorable to the plaintiff.” Resnick

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v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000).

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need not include “detailed factual allegations,” it must offer

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“more than an unadorned, the-defendant-unlawfully-harmed-me

When considering a Rule 12(b)(6) motion, a court must

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Although a complaint

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accusation.”

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allegations that are no more than a statement of a legal conclusion

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“are not entitled to the assumption of truth.” Id. at 679.

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other words, a pleading that merely offers “labels and

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conclusions,” a “formulaic recitation of the elements,” or “naked

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assertions” will not be sufficient to state a claim upon which

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relief can be granted.

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quotation marks omitted).

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Iqbal, 556 U.S. at 678.

Conclusory allegations or

In

Id. at 678 (citations and internal

“When there are well-pleaded factual allegations, a court should

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assume their veracity and then determine whether they plausibly

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give rise to an entitlement of relief.” Id. at 679.

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must allege “plausible grounds to infer” that their claims rise

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“above the speculative level.”

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“Determining whether a complaint states a plausible claim for

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relief” is a “context-specific task that requires the reviewing

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court to draw on its judicial experience and common sense.”

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556 U.S. at 679.

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III. Discussion

Plaintiffs

Twombly, 550 U.S. at 555.

Iqbal,

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A.

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Defendants first contend that Swiss’ False Advertising claims

False Advertising

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are insufficient because the Complaint fails to satisfy the

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heightened pleading requirements of Federal Rule of Civil Procedure

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9(b).

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applies to false advertising claims, and district courts are

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divided on the issue.

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Daniels-Midland Co., No. CV 11-3473 CBM, 2012 WL 3101659 *3 (C.D.

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Cal. Jul. 31, 2012).

The Ninth Circuit has not addressed the issue whether Rule 9

See, e.g., Western Sugar Co-op v. Archer-

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This court, however, need not resolve the disagreement, as the

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Complaint satisfies even Rule 9s heightened standard, which “only

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requires the identification of the circumstances constituting fraud

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so that the defendant can prepare an adequate answer from the

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allegations.”

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Cir. 1973).

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websites falsely represent themselves as independent of Regal, then

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criticize Plaintiff and recommend Regal (Compl. ¶¶ 27-30); (2)

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Regal sites use false information to give the impression of

Walling v. Beverly Enters., 476 F.2d 393, 397 (9th

Here, the Complaint clearly alleges that (1) Regal’s

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trustworthiness, including fabricated reviewer identities and

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backgrounds, such as that of “Mark C. Turner.” (Compl. ¶¶ 32-33.);

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and (3) Regal makes false, disparaging statements about Swiss,

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including claims that Swiss has been accused of baiting and

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switching, “steering” customers away from worthwhile investments,

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and irrationally emphasizing coins over bullion.

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Ex. 5.)

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mount an adequate defense.

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(Compl. ¶¶ 34,

These allegations are sufficient to allow Defendants to

Next, Defendants argue that the alleged misrepresentations are

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mere puffery.

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“exaggerated advertising, blustering, and boasting upon which no

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reasonable buyer would rely.”

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Co., 108 F.3d 1134, 1145 (9th Cir. 1997).

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comprised of vague, exaggerated, generalized, or subjective

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statements.

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F.Supp.2d 1030, 1039 (N.D. Cal. 2011) (citing Cook, Perkiss &

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Liehe, Inc. v. Northern California Collection Serv., Inc., 911 F.2d

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242, 246 (9th Cir. 1990).

This argument is not persuasive.

Puffery is

Southland Sod Farms v. Stover Seed
Puffery is typically

County of Marin v. Deloitte Consulting LLP, 836

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Here, Regal’s sites are alleged to falsely represent that they

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are independently operated, to put forth the fabricated opinions of

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purportedly knowledgeable professionals in the field who, in

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reality, do not exist, and to accuse Swiss of specific misdeeds

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such as baiting and switching.

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exaggerated, or subjective, and are precisely the type of

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representations upon which consumers might rely.

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are, therefore, not puffery, and are actionable.

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B.

These statements are not vague,

The statements

Trade Libel

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“Trade libel is the publication of matter disparaging the

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quality of another’s property, which the publisher should recognize

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is likely to cause pecuniary loss to the owner.”

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Inc. v. Jackson, 93 Cal. App. 4th 993, 1010 (2001).

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encompasses “all false statements concerning the quality of

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services or product of a business”.

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citation omitted).

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of a false and unprivileged statement of fact.

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13 Time Serv., Inc., 120 Cal. App. 4th 90, 104 (2004).

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action for trade libel must allege “(1) a publication, (2) which

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induces others not to deal with plaintiff, and (3) special

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damages.”

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2014 WL 2988271 at *13, (C.D. Cal. Jun. 30, 2014.)

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ComputerXpress
Trade libel

Id. (internal quotation and

The tort requires the intentional publication
Mann v. Quality Old
A cause of

New Show Studios LLC v. Needle, No. 2:14-cv-01250-CAS,

As discussed above, the Complaint adequately identifies the

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publications at issue.

Defendants also assert, albeit in brief,

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that the Complaint also fails to allege special damages.

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15-16.)

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alleges that Plaintiff depends upon word of mouth, and that online

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reviews are particularly important to Plaintiff’s business.

This argument, too, is unpersuasive.

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(Mot. at

The Complaint

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(Compl. ¶ 21.)

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Regal’s sites, Swiss alleges, Swiss has lost market share to Regal

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and suffered continuing irreparable harm to reputation and

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goodwill.

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C.

As a result of the alleged misrepresentations on

These allegations are sufficient.
Intentional Interference with Prospective Economic
Advantage

To satisfy the elements of the tort of intentional

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interference with prospective economic advantage, a plaintiff must

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show (1) an economic relationship between the plaintiff and some

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third party, with the probability of future economic benefit to the

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plaintiff; (2) the defendant’s knowledge of the relationship; (3)

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intentional acts on the part of the defendant designed to disrupt

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the relationship; (4) actual disruption of the relationship; and

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(5) economic harm to the plaintiff proximately caused by the acts

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of the defendant.

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Cal.4th 1134, 1153.

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“plead and prove that the defendant's acts are wrongful apart from

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the interference itself.” Della Penna v. Toyota Motor Sales, U.S.A,

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Inc., 11 Cal.4th 376, 393 (1995).

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Korea Supply Co. v. Lockheed Martin Corp., 29
To meet the third element, plaintiff must

Defendants argue that Swiss has failed to allege the existence

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of any economic relationship.

(Mot. at 17.)

The court agrees.

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The Complaint alleges that Regal’s actions have disrupted Swiss’

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online business and diverted market share away from Swiss and to

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Regal. (Compl. ¶ 24.)

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the existence of an economic relationship between Swiss and any

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third party or a probability that such a relationship would yield

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an economic benefit.

That allegation does not adequately state

Nor does the Complaint’s bare recitation of

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the elements (Id. ¶¶ 66-67) suffice.

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therefore dismissed, with leave to amend.

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IV.

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Swiss’ Sixth Claim is

Conclusion
For the reasons stated above, Defendants’ Motion to Dismiss is

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DENIED, in part and GRANTED, in part.

Plaintiff’s claim for

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intentional interference with prospective economic advantage is

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dismissed with leave to amend.

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filed within ten days of the date of this Order.

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respects, Defendants’ motion is DENIED.1

Any amended complaint shall be
In all other

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IT IS SO ORDERED.

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Dated: February 17, 2015
DEAN D. PREGERSON
United States District Judge

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As Defendants recognize, Plaintiff’s claim for unfair
business practices pursuant to California Business & Professions
Code § 7200 rises or falls with Plaintiff’s other claims.
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