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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1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 SWISS AMERICA TRADING CORPORATION, 12 Plaintiff, 13 v. 14 15 REGAL ASSETS, LLC; TYLER GALLAGHER, AN INDIVIDUAL; KELLY FELIX, AN INDIVIDUAL, 16 Defendants. 17 ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 14-04960 DDP (ASx) ORDER DENYING MOTION TO DISMISS IN PART AND GRANTING IN PART [Dkt. 22] 18 19 Presently before the court is Defendants Regal Assets, LLC 20 (“Regal”) and Tyler Gallagher (“Gallgher,” collectively, 21 “Defendants)’s Motion to Dismiss. 22 submissions of the parties and heard oral argument, the court 23 denies the motion and adopts the following order. 24 I. 25 Having considered the Background Plaintiff Swiss America Trading Corporation (“Plaintiff” or 26 “Swiss”) competes with Defendant Regal in the field of precious 27 metal sales. 28 /// (Complaint ¶ 1.) Plaintiff promotes itself online 1 and relies upon internet reviews and recommendations to generate 2 business, as does Regal. 3 (Id. ¶¶ 19, 24.) Swiss alleges that Defendant Regal operates an affiliate 4 marketing program, through which paid affiliates promote Regal on 5 affiliates’ websites. 6 efforts include both advertisements and reviews. 7 Complaint alleges, however, that Regal owns, operates, or otherwise 8 controls its affiliates’ websites, which include ostensibly 9 independent consumer reviews that disparage Swiss, make false (Compl. ¶¶ 22, 25.) Affiliates’ promotional (Id. ¶ 22.) The 10 statements, including completely fabricated reviewer identities and 11 credentials, and recommend Regal over Swiss. 12 (Id. ¶¶ 25-34.) The Complaint alleges causes of action for false and 13 misleading advertising under the Lanham Act, 15 U.S.C. 1125(a), and 14 state law, as well as state law causes of action for unfair 15 competition, trade libel, and intentional interference with 16 prospective economic advantage. 17 II. 18 Defendants now move to dismiss. Legal Standard A complaint will survive a motion to dismiss when it contains 19 “sufficient factual matter, accepted as true, to state a claim to 20 relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 21 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 22 570 (2007)). 23 “accept as true all allegations of material fact and must construe 24 those facts in the light most favorable to the plaintiff.” Resnick 25 v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). 26 need not include “detailed factual allegations,” it must offer 27 “more than an unadorned, the-defendant-unlawfully-harmed-me When considering a Rule 12(b)(6) motion, a court must 28 2 Although a complaint 1 accusation.” 2 allegations that are no more than a statement of a legal conclusion 3 “are not entitled to the assumption of truth.” Id. at 679. 4 other words, a pleading that merely offers “labels and 5 conclusions,” a “formulaic recitation of the elements,” or “naked 6 assertions” will not be sufficient to state a claim upon which 7 relief can be granted. 8 quotation marks omitted). 9 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 10 assume their veracity and then determine whether they plausibly 11 give rise to an entitlement of relief.” Id. at 679. 12 must allege “plausible grounds to infer” that their claims rise 13 “above the speculative level.” 14 “Determining whether a complaint states a plausible claim for 15 relief” is a “context-specific task that requires the reviewing 16 court to draw on its judicial experience and common sense.” 17 556 U.S. at 679. 18 III. Discussion Plaintiffs Twombly, 550 U.S. at 555. Iqbal, 19 A. 20 Defendants first contend that Swiss’ False Advertising claims False Advertising 21 are insufficient because the Complaint fails to satisfy the 22 heightened pleading requirements of Federal Rule of Civil Procedure 23 9(b). 24 applies to false advertising claims, and district courts are 25 divided on the issue. 26 Daniels-Midland Co., No. CV 11-3473 CBM, 2012 WL 3101659 *3 (C.D. 27 Cal. Jul. 31, 2012). The Ninth Circuit has not addressed the issue whether Rule 9 See, e.g., Western Sugar Co-op v. Archer- 28 3 1 This court, however, need not resolve the disagreement, as the 2 Complaint satisfies even Rule 9s heightened standard, which “only 3 requires the identification of the circumstances constituting fraud 4 so that the defendant can prepare an adequate answer from the 5 allegations.” 6 Cir. 1973). 7 websites falsely represent themselves as independent of Regal, then 8 criticize Plaintiff and recommend Regal (Compl. ¶¶ 27-30); (2) 9 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 10 trustworthiness, including fabricated reviewer identities and 11 backgrounds, such as that of “Mark C. Turner.” (Compl. ¶¶ 32-33.); 12 and (3) Regal makes false, disparaging statements about Swiss, 13 including claims that Swiss has been accused of baiting and 14 switching, “steering” customers away from worthwhile investments, 15 and irrationally emphasizing coins over bullion. 16 Ex. 5.) 17 mount an adequate defense. 18 (Compl. ¶¶ 34, These allegations are sufficient to allow Defendants to Next, Defendants argue that the alleged misrepresentations are 19 mere puffery. 20 “exaggerated advertising, blustering, and boasting upon which no 21 reasonable buyer would rely.” 22 Co., 108 F.3d 1134, 1145 (9th Cir. 1997). 23 comprised of vague, exaggerated, generalized, or subjective 24 statements. 25 F.Supp.2d 1030, 1039 (N.D. Cal. 2011) (citing Cook, Perkiss & 26 Liehe, Inc. v. Northern California Collection Serv., Inc., 911 F.2d 27 242, 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 28 4 1 Here, Regal’s sites are alleged to falsely represent that they 2 are independently operated, to put forth the fabricated opinions of 3 purportedly knowledgeable professionals in the field who, in 4 reality, do not exist, and to accuse Swiss of specific misdeeds 5 such as baiting and switching. 6 exaggerated, or subjective, and are precisely the type of 7 representations upon which consumers might rely. 8 are, therefore, not puffery, and are actionable. 9 B. These statements are not vague, The statements Trade Libel 10 “Trade libel is the publication of matter disparaging the 11 quality of another’s property, which the publisher should recognize 12 is likely to cause pecuniary loss to the owner.” 13 Inc. v. Jackson, 93 Cal. App. 4th 993, 1010 (2001). 14 encompasses “all false statements concerning the quality of 15 services or product of a business”. 16 citation omitted). 17 of a false and unprivileged statement of fact. 18 13 Time Serv., Inc., 120 Cal. App. 4th 90, 104 (2004). 19 action for trade libel must allege “(1) a publication, (2) which 20 induces others not to deal with plaintiff, and (3) special 21 damages.” 22 2014 WL 2988271 at *13, (C.D. Cal. Jun. 30, 2014.) 23 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 24 publications at issue. Defendants also assert, albeit in brief, 25 that the Complaint also fails to allege special damages. 26 15-16.) 27 alleges that Plaintiff depends upon word of mouth, and that online 28 reviews are particularly important to Plaintiff’s business. This argument, too, is unpersuasive. 5 (Mot. at The Complaint 1 (Compl. ¶ 21.) 2 Regal’s sites, Swiss alleges, Swiss has lost market share to Regal 3 and suffered continuing irreparable harm to reputation and 4 goodwill. 5 6 7 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 8 interference with prospective economic advantage, a plaintiff must 9 show (1) an economic relationship between the plaintiff and some 10 third party, with the probability of future economic benefit to the 11 plaintiff; (2) the defendant’s knowledge of the relationship; (3) 12 intentional acts on the part of the defendant designed to disrupt 13 the relationship; (4) actual disruption of the relationship; and 14 (5) economic harm to the plaintiff proximately caused by the acts 15 of the defendant. 16 Cal.4th 1134, 1153. 17 “plead and prove that the defendant's acts are wrongful apart from 18 the interference itself.” Della Penna v. Toyota Motor Sales, U.S.A, 19 Inc., 11 Cal.4th 376, 393 (1995). 20 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 21 of any economic relationship. (Mot. at 17.) The court agrees. 22 The Complaint alleges that Regal’s actions have disrupted Swiss’ 23 online business and diverted market share away from Swiss and to 24 Regal. (Compl. ¶ 24.) 25 the existence of an economic relationship between Swiss and any 26 third party or a probability that such a relationship would yield 27 an economic benefit. That allegation does not adequately state Nor does the Complaint’s bare recitation of 28 6 1 the elements (Id. ¶¶ 66-67) suffice. 2 therefore dismissed, with leave to amend. 3 IV. 4 Swiss’ Sixth Claim is Conclusion For the reasons stated above, Defendants’ Motion to Dismiss is 5 DENIED, in part and GRANTED, in part. Plaintiff’s claim for 6 intentional interference with prospective economic advantage is 7 dismissed with leave to amend. 8 filed within ten days of the date of this Order. 9 respects, Defendants’ motion is DENIED.1 Any amended complaint shall be In all other 10 11 12 IT IS SO ORDERED. 13 14 15 Dated: February 17, 2015 DEAN D. PREGERSON United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28 1 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. 7

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