Opinion
CIV. NO. 2:16-201 WBS DB
11-15-2016
THE NATIONAL GRANGE OF THE ORDER OF PATRONS OF HUSBANDRY, a District of Columbia nonprofit corporation, and THE CALIFORNIA STATE GRANGE, its chartered California chapter, Plaintiffs, v. CALIFORNIA STATE GRANGE d/b/a "California Guild," a California corporation, and ROBERT McFARLAND, a California resident, Defendants.
MEMORANDUM AND ORDER RE: MOTION TO DISMISS
Plaintiffs the National Grange and the California State Grange (collectively "plaintiffs") brought this action against defendants the California Guild and Robert McFarland (collectively "defendants"), alleging that defendants are falsely representing themselves to be the same organization as or responsible for the history and achievements of the California State Grange. (First Am. Compl. ("FAC") (Docket No. 75).) Presently before the court is defendants' motion to dismiss plaintiffs' first amended Complaint or, in the alternative, for a more definite statement of claims. (Defs.' Mot. to Dismiss ("Defs.' Mot.") (Docket No. 77).)
A central issue in this and previous proceedings is whether defendants may refer to themselves as the "California State Grange." Consistent with the court's rulings in previous orders, all references to the "California State Grange" in this Order refer to plaintiffs, not defendants.
I. Factual and Procedural Background
The National Grange is a nonprofit fraternal organization founded in 1867 to promote the interests of rural America and agriculture. (FAC ¶ 15.) It provides goods and services to agricultural communities and is involved in some 2,100 towns across the country. (Id.)
The National Grange created the California State Grange as its California affiliate in 1873. (Id. ¶ 16.) As a chartered affiliate, the California State Grange collects dues from local granges across California and turns over a portion of those dues to the National Grange. (Id.) In 1946, the California State Grange registered as a corporation with the California Secretary of State. (Id.) The California State Grange elected McFarland as its leader in 2009. (Id. ¶ 17.)
In 2012, disputes arose between the National Grange and members of the California State Grange. (Id.) As a result, the National Grange revoked the California State Grange's membership and the two sides disaffiliated in 2013. (See id.; Pls.' Mot. for Prelim. Inj., Mem. ("Pls.' Mem.") at 1 (Docket No. 76-1).) Members of the disaffiliated chapter, led by McFarland, continued to exist as a separate entity under the corporate charter filed in 1946. (Pls.' Mem. at 3-4.) The National Grange chartered a new California State Grange in 2014. (Id. at 7.) What resulted after the split, then, were two California entities: a newly chartered California State Grange (i.e., along with the National Grange, plaintiffs to this action) and a disaffiliated entity led by McFarland (i.e., defendants).
After the split, defendants continued to use the registered corporate name "California State Grange" and represent themselves publically as the California State Grange. (Id. at 3-4.) In March 2014, the National Grange filed an action against the disaffiliated entity for federal trademark infringement, trademark dilution, trademark counterfeiting, and false advertisement under the Lanham Act ("Grange I"). (Id. at 4.)
On July 14, 2015, this court granted the National Grange summary judgment on its trademark infringement and false advertisement claims. Nat'l Grange of the Order of Patrons of Husbandry v. Cal. State Grange, Civ. No. 2:14-676 WBS DAD, 115 F. Supp. 3d 1171, 1183 (E.D. Cal. 2015). The court permanently enjoined the disaffiliated entity from using the word "Grange," but declined to extend that prohibition to include the words "Granger," "CSG," and "CG" because the National Grange did not expressly seek such relief in its Grange I complaint. See Nat'l Grange of the Order of Patrons of Husbandry v. Cal. State Grange, Civ. No. 2:14-676 WBS DAD, 2015 WL 5813681, at *2-*3 (E.D. Cal. Sept. 30, 2015), modified, Civ. No. 2:14-676 WBS AC, 2016 WL 1587193 (E.D. Cal. Apr. 20, 2016).) The parties have appealed Grange I to the Ninth Circuit, where it is currently pending. Nat'l Grange of the Order of Patrons of Husbandry v. Cal. State Grange, Civ. No. 2:14-676 WBS AC, 2016 WL 1587193 ("Apr. 20 Order"), at *4 (E.D. Cal. Apr. 20, 2016).
The National Grange voluntarily dismissed its remaining Grange I claims with prejudice. Nat'l Grange of the Order of Patrons of Husbandry v. Cal. State Grange, Civ. No. 2:14-676 WBS AC, 2016 WL 1587193, at *3 n.2 (E.D. Cal. Apr. 20, 2016).
After Grange I, the disaffiliated entity changed its corporate name to the "California Guild." (Pls.' Mem. at 6.) Since that time, it has continued to publicly refer to itself as "CSG" and "[f]ormerly the California State Grange." (Decl. of Ed Komski ("Komski Decl.") Ex. 2, CSG Website Screenshots (Docket No. 54-3).)
Simultaneous to litigation in this court has been litigation in the California Superior Court over ownership of the California State Grange's property. (Pls.' Mem. at 6.) On August 18, 2015, the Superior Court entered judgment in favor of the National Grange and ordered that the California Guild "transfer to the Newly Chartered State Grange all Grange property in its possession or control as of the date its Charter was revoked." (FAC Ex. 1, State Ct. Docs. at 33 (Docket No. 75-1).) Defendants have appealed that order as well. (FAC ¶ 140.)
On February 1, 2016, plaintiffs brought the present action against defendants. (Compl. (Docket No. 1).) Plaintiffs allege that since Grange I, defendants have continued to engage in activities that damage their reputation and goodwill, such as taking credit for the California State Grange's history and achievements, misappropriating Grange trademarks and copyrights, spreading false rumors about Grange membership, and misrepresenting themselves to be successors to the California State Grange. (See FAC ¶¶ 18, 20, 24, 45.)
Plaintiffs bring the following causes of action against defendants: (1) false designation of origin under the Lanham Act, 15 U.S.C. § 1125(a)(1)(A); (2) false advertisement under the Lanham Act, 15 U.S.C § 1125(a)(1)(B); (3) false advertisement under the California Business and Professional Code, Cal. Bus. Prof. Code § 17500; (4) trademark infringement under the Lanham Act, 15 U.S.C. § 1114; (5) infringement of unregistered logo and trade dress under the Lanham Act, 15 U.S.C § 1125(a); (6) copyright infringement under federal law, 17 U.S.C. § 106; (7) trade libel under California common law; (8) intentional interference with contractual relations under California common law; (9) trespass under California common law; and (10) conversion under California common law. (Id. at 38-51.) Defendants now move to dismiss plaintiffs' amended Complaint in its entirety or, in the alternative, for a more definite statement of claims. (Defs.' Mot., Mem. ("Defs.' Mem.") at 2-3.)
II. Motion to Dismiss
On a motion to dismiss for failure to state a claim under Rule 12(b)(6), the court must accept the allegations in the pleadings as true and draw all reasonable inferences in favor of the plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a plaintiff must plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions . . . ." Twombly, 550 U.S. at 555 (citation omitted). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice," and "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
A. False Designation of Origin, False Advertisement, and Trademark Infringement Under the Lanham Act
Five of plaintiffs' ten causes of action--false designation of origin, federal false advertisement, state false advertisement, infringement of unregistered logo and trade dress, and trademark infringement--arise under or require substantially the same proof as section 43(a) of the Lanham Act ("section 43(a)"), 15 U.S.C. 1125(a). False designation of origin arises under section 43(a)(1)(A), and federal false advertisement arises under section 43(a)(1)(B). Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1384 (2014) ("Section 1125(a) thus creates two distinct bases of liability: false association, § 1125(a)(1)(A), and false advertising, § 1125(a)(1)(B).").
False advertisement under the California Business and Professional Code requires the same proof as federal false advertisement. See Homeland Housewares, LLC v. Euro-Pro Operating LLC, No. CV 14-03954 DDP MANX, 2015 WL 476287, at *2 (C.D. Cal. Feb. 5, 2015) ("[F]alse advertising claims under California's Unfair Competition Act . . . are 'substantially congruent' to claims made under the Lanham Act. Therefore, the Court analyzes the state and federal false advertising claims together.") (internal citation omitted)).
Trademark infringement under section 32(1) of the Lanham Act requires the same proof as false designation of origin. See Brookfield Commc'ns, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036, 1046 n.6 (9th Cir. 1999) ("The same standard [embodied in section 32(1) of the Lanham Act] is embodied in section 43(a)(1) of the Lanham Act . . . ."); Grey v. Campbell Soup Co., 650 F. Supp. 1166, 1173 (C.D. Cal. 1986) ("The tests for infringement of a federally registered mark under § 32(1) . . . [and] unfair competition under § 43(a), 15 U.S.C. § 1125(a) . . . are the same"), aff'd, 830 F.2d 197 (9th Cir. 1987).
The key distinction between trademark infringement and false designation of origin is that the former "applies to federally registered marks" while the latter applies "to both registered and unregistered trademarks." Brookfield Commc'ns, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036, 1046 n.6 (9th Cir. 1999). That distinction is not relevant here because plaintiffs have alleged infringement of both registered and unregistered trademarks. (See FAC ¶¶ 125, 135.)
"Infringement of unregistered logo and trade dress" appears to be the same claim as false designation of origin. Plaintiffs cite section 43(a) as the statutory basis for "infringement of unregistered logo and trade dress," but the court is not aware of any case holding that it is a separate cause of action from false designation of origin. Moreover, plaintiffs concede that to the extent "infringement of unregistered logo and trade dress" is not alleged with specificity, it "is subsumed by the false designation of origin claim." (Pls.' Opp'n at 23.) Accordingly, the court will dismiss plaintiffs' claim for "infringement of unregistered logo and trade dress."
Plaintiffs' confusion appears to stem from the fact that false designation of origin "protects against infringement of unregistered marks and trade dress as well as registered marks." Brookfield, 174 F.3d at 1047 n.8.
The only section 43(a) claims that the court must decide whether plaintiff plausibly alleged, therefore, are false designation of origin and false advertisement.
1. False Designation of Origin
The Ninth Circuit has held that a false designation of origin claim under section 43(a)(1)(A) requires proof that defendants "(1) use[d] in commerce (2) any word, false designation of origin, false or misleading description, or representation of fact, which (3) is likely to cause confusion or misrepresents the characteristics of his or another person's goods or services." Freecycle Network, Inc. v. Oey, 505 F.3d 898, 902 (9th Cir. 2007); see also Luxul Tech. Inc. v. Nectarlux, LLC, 78 F. Supp. 3d 1156, 1170 (N.D. Cal. 2015) (holding the same). "'[C]ommerce' as used in the Lanham Act . . . include[s] 'all commerce which may lawfully be regulated by Congress.' It is well settled that so defined 'commerce' [means] interstate commerce." Thompson Tank & Mfg. Co. v. Thompson, 693 F.2d 991, 993 (9th Cir. 1982).
The Ninth Circuit has held that interstate commerce for these purposes "includes intrastate commerce which 'affects' interstate commerce." Id. at 992-93. Additionally, courts in this circuit have held that communications made on public websites are made in interstate commerce. See United States v. Sutcliffe, 505 F.3d 944, 952-53 (9th Cir. 2007) ("[T]he Internet is an instrumentality and channel of interstate commerce." (internal citation omitted).); Homeland Housewares, LLC v. Euro-Pro Operating LLC, No. CV 14-03954 DDP MANX, 2015 WL 476287, at *2 (C.D. Cal. Feb. 5, 2015) ("[P]lacing a [product] review on a widely-available website is placing a statement into interstate commerce . . . ."). Plaintiffs allege that defendants are representing, via public websites, that they are the same organization as or responsible for the history and achievements of the California State Grange. (See FAC ¶¶ 20-26, 69.) Such representations are allegedly resulting in "loss of goodwill" to the California State Grange and, in turn, the National Grange. (Id. ¶¶ 78, 83.) Because defendants' representations are available on public websites and allegedly damaging the National Grange's reputation, they are made in interstate commerce.
Defendants also challenge whether the California State Grange and California Guild can be said to engage in "commerce" to begin with. (See Defs.' Mem. at 7.) According to defendants, the two groups are "non-profit corporations that do not engage in commerce," which precludes coverage under the Lanham Act. (Id.) Contrary to that argument, federal courts in this circuit and others have held that "the mere fact that a speaker is a nonprofit organization does not preclude its speech from being commercial speech, or 'commercial advertising or promotion' within the meaning of section 43(a)." Nat'l Servs. Grp., Inc. v. Painting & Decorating Contractors of Am., Inc., No. SACV0 6-563CJC(ANX), 2006 WL 2035465, at *4 (C.D. Cal. July 18, 2006). In keeping with that understanding, federal courts routinely hold nonprofit entities liable under section 43(a). See, e.g., Comm. for Idaho's High Desert, Inc. v. Yost, 92 F.3d 814, 822 (9th Cir. 1996) (applying section 43(a) to "two non-profit advocacy groups"); Nat'l Servs. Grp., 2006 WL 2035465, at *4 (holding that "nonprofit trade organization that represents the interests of painters and decorators" may be liable under section 43(a)); Gideons Int'l, Inc. v. Gideon 300 Ministries, Inc., 94 F. Supp. 2d 566, 568, 577 (E.D. Pa. 1999) (applying section 43(a) to nonprofit religious groups). Accordingly, defendants' "commerce" argument fails.
Plaintiffs allege that defendants are making representations that confuse the public as to the identity of the California State Grange and California Guild. According to plaintiffs, defendants are: (1) taking credit for the California State Grange's history and achievements, (see FAC ¶¶ 20-26, 42, 76): (2) copying logos, backdrop, and content from the California State Grange's website as to make their website look identical to plaintiffs' website, (see id. ¶¶ 18, 24-25, 30); and (3) violating the court's April 20 Order by continuing to use the word "Grange" in public communications, soliciting Grange dues, using Grange bank accounts, and performing Grange rituals using Grange regalia, (see id. ¶¶ 45-47, 68, 75-76, 112, 125, 128). Such activities, according to plaintiffs, have "caused actual confusion among at least fifty of Plaintiffs' members" and resulted in some members disaffiliating from plaintiffs to join defendants. (Id. ¶¶ 75, 79, 130.)
Specifically, plaintiffs allege that defendants are making statements along the lines of the following:
The CSG . . . is the oldest agricultural organization in California, started in 1870. Cities and townships have grown up around our rural halls . . . . The CSG has lobbyists in Sacramento and boasts a long history of successful legislative advocacy. The CSG was the first organization to support and promote women as equal voting members. . . . In these uncertain times our members find comfort and security by returning to our roots and reaffirming principles and goals set by the founders 140 years ago.(FAC ¶ 20 (internal citation omitted).) As explained in the court's September 23, 2016 Order partially granting plaintiffs' motion for preliminary injunction, while defendants are technically correct when they refer to themselves as having existed since 1946 because they continue to occupy the California State Grange's 1946 corporate charter, at least some of their other statements--namely, their references to a history prior to 1946--are undeniably false. (See Sept. 23, 2016 Order at 12 (Docket No. 93).)
Defendants note that they use disclaimers that refer to the California State Grange as "Grange of California Order of Patrons of Husbandry." (Defs.' Mem. at 15.) Plaintiffs allege that "the name 'Grange of the State of California's Patrons of Husbandry Chartered' is unknown to the California Granges," however. (FAC ¶ 22.) Accordingly, defendants' disclaimers do not defeat plaintiffs' allegations of confusion among local granges.
Uncredited references to another entity's history and achievements may constitute "false or misleading" representations as to give rise to liability under section 43(a). See, e.g., ITEX Corp. v. Glob. Links Corp., 90 F. Supp. 3d 1158, 1171 (D. Nev. 2015) (trade exchange's claim to forty-year history of unaffiliated company violates section 43(a)); Riggs Inv. Mgmt. Corp. v. Columbia Partners, L.L.C., 966 F. Supp. 1250, 1267 (D.D.C. 1997) (investment company violated section 43(a) when it represented itself as responsible for another firm's investment record). Use of substantially similar website logos and backgrounds may also give rise to liability under section 43(a). See, e.g., GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1206 (9th Cir. 2000) (holding that plaintiff is likely to succeed on section 43(a) claim where defendant used "glaringly similar" logo); CJ Prod. LLC v. Snuggly Plushez LLC, 809 F. Supp. 2d 127, 161 (E.D.N.Y. 2011) (holding that plaintiff is likely to succeed on section 43(a) claim where defendant's website "looks substantially similar" to plaintiffs' website).
The same is true of performance of similar functions, see, e.g., Herb Reed Enterprises, Inc. v. Monroe Powell's Platters, LLC, 25 F. Supp. 3d 1316, 1325 (D. Nev. 2014) (finding section 43(a) liability where one music group "market[ed] similar live vocal performances" as another) , and misappropriation of trademarks, see Brookfield, 174 F.3d at 1046 n.6 (proving trademark infringement proves violation of section 43(a)).
The cases cited here are false advertisement and trademark infringement cases. But their 'false or misleading' analysis is applicable to false designation of origin because all three types of claims require proof of "false or misleading representation of fact" under section 43(a)(1). See Lexmark Int'l, 134 S. Ct. at 1384 (holding that false designation of origin and false advertisement each arise under section 43(a)(1)); Luxul Tech, 78 F. Supp. 3d at 1170 ("To establish a claim for either trademark infringement or false designation of origin under § 43(a)(1)(A) . . . a plaintiff must prove that the defendant (1) used in commerce (2) any word, false designation of origin, false or misleading description, or representation of fact . . . .").
Because plaintiffs have plausibly alleged that defendants are making false or misleading representations in interstate commerce that confuse the public, they have stated plausible claims for false designation of origin and, by extension, trademark infringement.
2. False Advertisement
The Ninth Circuit has held that a false advertisement claim under section 43(a)(1)(B) requires: "(1) a false statement of fact by the defendant in a commercial advertisement about its own or another's product; (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; (3) the deception is material, in that it is likely to influence the purchasing decision; (4) the defendant caused its false statement to enter interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a lessening of the goodwill associated with its products." Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997).
"False" for these purposes means false or misleading. See Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997) ("To demonstrate falsity within the meaning of the Lanham Act, a plaintiff may show that the statement was literally false . . . or that the statement was literally true but likely to mislead or confuse consumers.").
As explained in the 'false designation of origin' section, plaintiffs have plausibly alleged that defendants are making false or misleading representations in interstate commerce that is causing confusion among local granges, some members to disaffiliate from plaintiffs, and loss of goodwill. That is enough to satisfy each prong of Southland Sod Farms. Accordingly, plaintiffs have stated plausible claims for false advertisement under the Lanham Act and, by extension, section 17500 of the California Business and Professional Code.
3. Defendants' Defenses
Defendants raise several defenses to plaintiffs' Lanham Act claims. First, they argue that the representations plaintiffs attribute to them constitute protected political speech under the First Amendment. (Defs.' Mem. at 7-11.) It is well established that the "First Amendment does not protect false or misleading commercial speech," however. Amarin Pharma, Inc. v. U.S. Food & Drug Admin., 119 F. Supp. 3d 196, 228 (S.D.N.Y. 2 015); see also Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 771-72 (1976) ("Untruthful speech, commercial or otherwise, has never been protected for its own sake."). At least some statements and representations plaintiffs attribute to defendants are "false or misleading" under the authorities cited above. See ITEX Corp., 90 F. Supp. 3d at 1171; Riggs Inv. Mgmt. Corp., 966 F. Supp. at 1267; GoTo.com, Inc., 202 F.3d at 1206; CJ Prod. LLC, 809 F. Supp. 2d at 161; Herb Reed Enterprises, 25 F. Supp. 3d at 1325; Brookfield, 174 F.3d at 1046 n.6. That speech is not protected. Accordingly, the court will not dismiss plaintiffs' claims on First Amendment grounds.
Second, defendants cite to cases holding that mere "criticism" and "opinion" cannot serve as bases of liability under the Lanham Act. (Defs.' Mem. at 7-11.) Those cases are easily distinguishable because defendants' alleged statements are not mere criticism or opinion, but assertions of fact. (See, e.g., FAC ¶ 20 (defendants claim that "[t]he CSG . . . is the oldest agricultural organization in California, started in 1870. . . . [That t]he CSG was the first organization to support and promote women as equal voting members. . . . [That their] roots and reaffirming principles and goals [were] set by the founders 140 years ago." (emphases added)).) If defendants made clear to the public that their statements taking credit for plaintiffs' history and achievements were merely statements of opinion, their argument may have merit. But under the facts alleged by plaintiffs, that is not the case.
Third, defendants argue that their representations are protected under the Noerr-Pennington doctrine, which holds that "those who petition any department of the government for redress are generally immune from statutory liability for their petitioning conduct." See Sosa v. DIRECTV, Inc., 437 F.3d 923, 929 (9th Cir. 2006). That doctrine extends to "conduct incidental to the prosecution of [a] suit." Columbia Pictures Indus., Inc. v. Prof'l Real Estate Inv'rs, Inc., 944 F.2d 1525, 1528 (9th Cir. 1991), aff'd, 508 U.S. 49 (1993). The representations plaintiffs attribute to defendants rise far beyond "petitioning conduct," however. Taking credit for another's history and achievements, designing one's website to look the same as another's, using another's trademark publicly, and performing the same rituals as another have nothing to do with the present litigation. None of that activity is related to defending a lawsuit. Accordingly, the court will not dismiss plaintiffs' claims on Noerr-Pennington grounds.
With respect to plaintiffs' California false advertisement claim, defendants argue that a separate litigation privilege exists under California Civil Code section 47. (See Defs.' Mem. at 21-22 (noting that California Civil Code section 47(b)(2) protects "communications by a litigant to a judicial proceeding that have some connection or logical relation to the action").) That argument fails for the reasons defendants' Noerr-Pennington argument fails.
Fourth, defendants argue that plaintiffs' Lanham Act claims are barred under the doctrine of res judicata because the court already adjudicated those claims in Grange I. (See Defs.' Mem. at 17-18.) Res judicata only bars claims that are identical to each other, however. Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001) (citing W. Radio Servs. Co. v. Glickman, 123 F.3d 1189, 1192 (9th Cir.1997)). Where a subsequent claim does not "arise out of the same transactional nucleus of facts" as its predecessor, it is not barred. See id. at 714.
Grange I decided ownership of the word "Grange," and enjoined defendants from the use of that term (see Apr. 20 Order at 3). The conduct alleged to support plaintiff's Lanham Act claims in this action is different from the conduct enjoined in Grange I. It involves more than merely the use of the word "Grange." To the extent that the complaint here alleges that defendants are representing they are the same organization as the California State Grange, that they are responsible for the history and achievements of the California State Grange, or making other false or misleading representations causing confusion among local granges, it goes beyond the complaint in Grange I and seeks to enjoin different conduct. Accordingly, the court will not dismiss plaintiffs' Lanham Act claims on res judicata grounds.
B. Copyright Infringement
To state a claim for copyright infringement, plaintiff must plausibly allege: "(1) ownership of a valid copyright; and (2) that the defendant violated the copyright owner's exclusive rights under the Copyright Act." Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir. 2004) (citing 17 U.S.C. § 501(a)).
Here, plaintiffs have attached, as exhibits to their amended Complaint, copyright registrations for content on their website, including information about the California State Grange's history, foundation, and membership. (See FAC Ex. B, Copyright Registrations (Docket No. 75-2).) They allege that without permission, defendants copied such materials onto their website in violation of section 106 of United States Copyright Law, (see FAC ¶¶ 117-120), which confers upon copyright owners the exclusive right to "reproduce the copyrighted work" or "prepare derivative works based upon the copyrighted work," 17 U.S.C. § 106. Because plaintiffs have alleged ownership of the website materials and defendants' unauthorized copying of such materials, they have stated a plausible claim for copyright infringement.
Defendants argue that their website materials are not identical to plaintiffs'. (Defs.' Mem. at 25.) To succeed on a copyright infringement claim, however, plaintiff need not prove identity of copied materials; substantial similarity suffices. See Shaw v. Lindheim, 919 F.2d 1353, 1356 (9th Cir. 1990) ("[A] plaintiff may establish copying by showing that the infringer had access to the work and that the two works are substantially similar."). Plaintiffs have alleged substantial similarity in the website materials. (See, e.g., FAC ¶ 20 (alleging that defendants' "advertisements and representation about its history and goodwill on its new website . . . were copied verbatim from the former California State Grange website except for the substitution of 'CSG' in lieu of 'California State Grange'").)
Defendants also argue that plaintiffs did not rule out the possibility that they independently created the website materials after splitting from plaintiffs in 2013. (See Defs.' Mem. at 24-25.) That argument misses the fact that plaintiffs allege defendants copied materials from their website with copyright registrations dated 2010. (FAC ¶¶ 117, 119; Copyright Registrations.) Accordingly, the court will not dismiss plaintiffs' copyright infringement claim.
C. Trade Libel
Under California law, "[t]rade libel is the publication of matter disparaging the quality of another's property, which the publisher should recognize is likely to cause pecuniary loss to the owner." ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 993, 1010 (4th Dist. 2001) (citing Leonardini v. Shell Oil Co., 216 Cal. App. 3d 547, 572 (3d Dist. 1989)). It encompasses "all false statements concerning the quality of services or product of a business which are intended to cause that business financial harm and in fact do so." Leonardini, 216 Cal. App. 3d at 572.
Plaintiffs allege that defendants disparage their name and goodwill by publicly claiming that the newly chartered California State Grange " IS NOT the original California State Grange" and not heir to the 146-year history that it has accrued since being founded in 1870. (FAC ¶¶ 20, 113.) The alleged statements are false, see supra note 5, and obviously calculated to cause loss of goodwill and membership to plaintiffs. Accordingly, plaintiffs have plausibly alleged trade libel.
D. Intentional Interference with Contractual Relations
Under California law, "[t]he elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage." Pac. Gas & Elec. Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1126 (1990).
Plaintiffs' claim appears to be that defendants are causing local granges to breach their contractual duties under Grange by-laws by convincing them to leave the California State Grange to join the California Guild. (See FAC ¶¶ 112-113.) They have not cited any by-laws that require local granges to remain members of the California State Grange, however. The by-laws plaintiffs cite merely require that local granges "comply with the Constitution, By-Laws and Codes of the Grange at all levels." (Id. ¶ 109.) There is no indication that such obligations include remaining members of the Grange. Moreover, plaintiffs have not alleged that Grange by-laws are contractual in nature--that is, that local granges offered and accepted consideration in becoming Grange members, that remaining in the Grange was part of the contract, and so forth. Accordingly, plaintiffs have failed to state a plausible claim for intentional interference with contractual relations.
Plaintiffs also appear to be alleging that defendants are causing local granges to breach Grange by-laws by collaborating with them while they remain Grange members. To the extent that is what the claim is, plaintiffs have alleged neither the specific by-laws being broken nor that the by-laws are contractual to begin with. Accordingly, that claim fails under Federal Rule of Civil Procedure 8 for vagueness. See Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001) (a complaint must "give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests").
E. Trespass and Conversion
Under California law, "[c]onversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff's ownership or right to possession of the property; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages." Hernandez v. Lopez, 180 Cal. App. 4th 932, 939 (4th Dist. 2009) (quoting Burlesci v. Petersen, 68 Cal. App. 4th 1062, 1066 (1st Dist. 1998)), as modified (Dec. 28, 2009). "Dubbed by Prosser the 'little brother of conversion,' the tort of trespass to chattels allows recovery for interferences with possession of personal property 'not sufficiently important to be classed as conversion' . . . ." Intel Corp. v. Hamidi, 30 Cal. 4th 1342, 1350 (2003).
Plaintiffs allege that defendants convert and trespass upon their property by continuing to occupy Grange buildings and refusing to return tangible Grange property after the 2013 split. (See FAC at 50-51.) In addition to "preventing Plaintiffs[ from] access[ing] said property," defendants' actions have allegedly "harmed Plaintiffs by causing confusion among the California Granges" as to the identity of the California State Grange and the California Guild. (Id.) Because plaintiffs allege ownership of the property, defendants' wrongful occupation of and refusal to return the property, and resulting damages, they have stated plausible claims for trespass and conversion under California law.
Plaintiffs' trespass and conversion claims are not barred under the doctrine of res judicata by the underlying state court action in this case because that action remains pending on appeal. See Eichman v. Fotomat Corp., 759 F.2d 1434, 1439 (9th Cir. 1985) ("Under California law . . . a judgment is not final for purposes of res judicata during the pendency of and until the resolution of an appeal."); see also Howard v. Am. Online Inc., 208 F.3d 741, 748 (9th Cir. 2000) ("The preclusive effect of a state court judgment in federal court is based on state preclusion law."). Neither does Grange I bar such claims, as Grange I decided ownership of the word "Grange," (see Apr. 20 Order at 3), not defendants' subsequent alleged refusal to vacate and return Grange property. See W. Radio Servs., 123 F.3d at 1192 ("In order for res judicata to apply there must be . . . an identity of claims . . . ."). Accordingly, the court will not dismiss plaintiffs' trespass and conversion claims on res judicata grounds.
III. Motion for a More Definite Statement
With respect to the claims the court will not dismiss, defendant moves under Federal Rule of Civil Procedure 12(e) for a more definite statement of the claims. (Defs.' Mot. at 3-4.) "A Rule 12(e) motion is proper only where the complaint is so indefinite that the defendant cannot ascertain the nature of the claim[s] being asserted." Sagan v. Apple Computer, Inc., 874 F. Supp. 1072, 1077 (C.D. Cal. 1994) (citing Famolare, Inc. v. Edison Bros. Stores, Inc., 525 F.Supp. 940, 949 (E.D. Cal. 1981)). "Motions for a more definite statement are viewed with disfavor and are rarely granted because of the minimal pleading requirements of the Federal Rules. Parties are expected to use discovery, not the pleadings, to learn the specifics of the claims being asserted." Id. (citing In re American Int'l Airways, Inc., 66 B.R. 642, 645 (E.D. Pa. 1986)).
Plaintiffs' amended Complaint provides more than enough information to alert defendants as to the nature of the claims asserted against them. Defendants appear to have no trouble responding to the claims in their motion to dismiss, in their reply, and at oral argument. Accordingly, the court will deny defendants' motion for a more definite statement.
IT IS THEREFORE ORDERED that defendants' motion to dismiss plaintiffs' first amended Complaint or, in the alternative, for a more definite statement of claims, be, and the same hereby is, GRANTED IN PART and DENIED IN PART as follows:
(1) plaintiffs' "infringement of unregistered logo and trade dress" and intentional interference with contractual relations claims are DISMISSED;Dated: November 15, 2016
(2) defendants' motion to dismiss plaintiffs' other claims is DENIED; and
(3) defendants' motion for a more definite statement of the non-dismissed claims is DENIED.
/s/_________
WILLIAM B. SHUBB
UNITED STATES DISTRICT JUDGE