UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
August 11, 2009
FRANKLIN FUELING SYSTEMS, INC., PLAINTIFF,
VEEDER-ROOT COMPANY AND DOES 1 THROUGH 20, DEFENDANTS.
The opinion of the court was delivered by: Frank C. Damrell, Jr. United States District Judge
MEMORANDUM AND ORDER
This matter is before the court on defendant Veeder-Root Co.'s ("Veeder-Root" or "defendant") motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff Franklin Fueling Systems, Inc. ("Franklin" or "plaintiff") opposes the motion. For the reasons set forth below, defendant's motion to dismiss is DENIED.*fn1
In March 2000, the California Air Resources Board ("ARB") adopted regulations requiring most gas stations to upgrade vapor recovery systems over a period of ten years. (Pl.'s First Am. Compl. [Docket # 20], filed May 26, 2009, ¶ 15.) These regulations included a requirement that gas stations upgrade vapor recovery systems with Enhanced Vapor Recovery ("EVR") systems by April 1, 2009, and that they install in-station diagnostics ("ISD") systems by September 1, 2009. (Id.) In order to comply with the ARB regulations, EVR systems must be ARB-certified. (Id. at ¶ 17.)
The Healy Phase II Enhanced Vapor Recovery System ("Healy System"), initially owned by the inventor, Jim Healy, was ARB-certified on April 8, 2005. (Id.) The Veedor Root ISD, certified on August 31, 2005, was the first ISD system to be ARB-certified. (Id. at ¶ 18.) In September 2006, Franklin bought and obtained rights to the Healy System. (Id. at ¶ 20.) On November 5, 2007, Vapor System Technologies, Inc. ("VST") obtained certification for an EVR System. (Id. at ¶ 21.) Sometime thereafter, Veeder-Root designed the Veeder-Root Carbon Canister, a component which replaced the VST vapor processor of the VST System. (Id.) On October 17, 2008, ARB certified the use of the Veeder-Root Carbon Canister with the VST Sytem ("VR/VST System"). (Id.) Plaintiff alleges that the VR/VST System was substantially less expensive than the VST System. (Id.)
Plaintiff contends that prior to the certification of the VST System, the Healy System controlled 100% of the market, but nevertheless maintained 95% of the market after the introduction of the competing system through early 2009. (Id. at ¶ 23.) Plaintiff claims that Veeder-Root began distributing marketing materials that made false factual statements about the Healy System, allegedly stating that (1) one in four Healy Systems failed, and (2) that an ARB investigation had concluded that problems with the Healy System were triggering alarms on the Veeder-Root ISD, causing the Veeder-Root ISD to shut down dispensers. (Id. at ¶ 24.) Plaintiff claims that Veeder-Root's allegedly false statements were largely based upon problems with false alarms that gas station owners began reporting in late 2008 when using Veeder Root ISDs in conjunction with the Healy System. (Id. at ¶ 25.) Plaintiff alleges that the problem with false alarms did not arise when the Healy System was used in conjunction with the Incon ISD. (Id.) Plaintiff claims that when false alarms occurred frequently, the Veeder-Root ISD shut down all of the station's fueling dispensers, requiring a technician to reset the system. (Id.) By contrast, plaintiff claims, the Incon ISD shuts down only the fueling dispenser responsible for triggering the alarms. (Id.)
After receiving a number of complaints, plaintiff alleges the ARB instituted an investigation into the cause of the false alarms. (Id. at ¶ 26.) Plaintiff claims that the ARB advised Franklin and Veeder-Root not to publicize statements regarding the cause of the false alarms until it completed its investigation. (Id.) Plaintiff alleges that though ARB has not yet reached a formal conclusion as to the cause of the false alarms, it released a PowerPoint presentation to the California Pollution Control Officers' Association ("CAPCOA") concerning its tentative findings. (Id.)
Plaintiff claims that around February 12, 2009, Veeder-Root began circulating certain materials containing false statements, using the CAPCOA presentation to make it appear as if ARB endorsed the allegedly false statements. (Id. at ¶ 27.) Specifically, plaintiff asserts that defendant circulated an email containing the allegedly false statements, with ARB's PowerPoint presentation and a Veeder-Root marketing document attached (hereinafter, the "Marketing Materials"). (Id.) Plaintiff contends that the statements were false in the following ways: (1) ARB did not find a 22% failure rate for the Healy System, nor did it find that one in four Healy Systems needed to be replaced; (2) the contention that Healy Systems "contribute to site maintenance costs" is factually incorrect, as it is the conjunction of the Veeder-Root ISD System with the Healy System that leads to increased maintenance costs; (3) ARB has not reached a conclusion that the Healy System is the cause of the false alarms, and Veeder-Root's contention otherwise is in violation of ARB's advisory that Veeder-Root and Franklin refrain from issuing public announcements regarding the cause of the false alarms. (Id. at ¶¶ 29-31.) Plaintiff alleges that these false statements, among others, have been distributed to the public in California and other states, including potential purchasers of the Healy System. (Id. at ¶ 32.) Plaintiff further contends that the dissemination of the false statements in the Marketing Materials have damaged Franklin through significant losses in its market share for EVR Systems, evidenced by a reduction in its market share from 95% to 75%-50%, resulting in the loss of millions of dollars. (Id. at ¶ 33.)
On a motion to dismiss, the allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). The court is bound to give the plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). Thus, the plaintiff need not necessarily plead a particular fact if that fact is a reasonable inference from facts properly alleged. See id.
Nevertheless, it is inappropriate to assume that the plaintiff "can prove facts which it has not alleged or that the defendants have violated the... laws in ways that have not been alleged." Associated Gen. Contractors of Calif., Inc. v. Calif. State Council of Carpenters, 459 U.S. 519, 526 (1983). Moreover, the court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). Indeed, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)(citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
In ruling upon a motion to dismiss, the court may consider only the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201.
See Mir v. Little Co. of Mary Hospital, 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of United States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998).
Ultimately, the court may not dismiss a complaint in which the plaintiff alleged enough facts to "state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. at 570August 8, 2009). Only where a plaintiff has failed to "nudge [his or her] claims across the line from conceivable to plausible," is the complaint properly dismissed. Id. at 1952. When there are well-pleaded factual allegations, "a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. at 1950.
A. Lanham Act
Plaintiff's first cause of action is for false and misleading advertising pursuant to the Lanham Act, 15 U.S.C. § 1125(a).*fn4 Specifically, plaintiff contends that defendant caused the Marketing Materials, containing material, false and misleading statements likely to deceive those who see or hear them, to enter interstate commerce, leading to a direct diversion of sales from plaintiff to defendant and a lessening of the goodwill associated with plaintiff's products. Plaintiff alleges that the Marketing Materials contained the following false and misleading statements, among others: (1) "ARB indicates... 22% failure rate found contributing to degradation ISD alarms"; (2) "Customer Options: Option 1: Replace 1 in 4 nozzles to maintain assist site performance"; (3) "Assist nozzles contribute to site maintenance costs"; (4) "the problem in the overwhelming majority of cases are in the Nozzles, not the ISD System or its protocol/software. Attached are two documents supporting this position; 1) CARB ppt presentation to Capcoa...." (FAC ¶ 28.)
Defendant contends that plaintiff has not stated a claim under the Lanham Act because: (1) plaintiff inadequately pled false or misleading statements; (2) plaintiff identified statements of opinion rather than fact; (3) defendant's statements are at most puffery; and (4) plaintiff has not adequately alleged injury to its business.
The central focus of the Lanham Act is to prevent false or misleading representations in promoting a product in the marketplace. See Mutual Pharm. Co. v. Ivax Pharms., Inc., 459 F. Supp. 2d 925, 932 (C.D. Cal. 2006). As such, "the Lanham Act is primarily intended to protect commercial interests from being harmed by the unfair competition created by a competitor... using false or misleading advertising" to promote its products. Id. at 933 (citations omitted). In order to make out a false advertising claim under § 1125(a) of the Lanham Act, a plaintiff must prove the following five elements: (1) in its advertisements, the defendant made false statements of fact about its product or the product of another; (2) those advertisements actually deceived or have the tendency to deceive a substantial segment of their audience; (3) the deception is material, in that it is likely to influence the purchasing decision; (4) the defendant caused its falsely advertised goods to enter interstate commerce; and (5) the plaintiff has been or is likely to be injured as the result of the foregoing either by direct diversion of sales from itself to defendant, or by lessening of the good will which its products enjoy with the buying public. Cook, 911 F.2d at 244.
In its motion to dismiss, defendant first asserts that plaintiff has not adequately pleaded facts or misleading statements, arguing that a comparison of its own statements with the information released by ARB establishes the truth of defendants' statements. Such an inquiry, however, is not appropriate at this stage in the proceedings. See Cook, 911 F.2d at 245. Rather, at issue now is solely the sufficiency of plaintiff's pleading--whether the claims alleged are sufficient under the relevant laws. In rendering this decision, the court must accept plaintiff's allegations as true.
Here, plaintiff alleges defendant's statements were false in the following ways: (1) ARB did not find a 22% failure rate for the Healy System, nor that one in four Healy Systems needed to be replaced; (2) the Healy System does not "contribute to site maintenance costs"; and (3) ARB has not reached the conclusion that the Healy System is causing the false alarms. (FAC ¶¶ 29-31.) Assuming the truth of these allegations, as it must, the court finds that plaintiff has sufficiently pled false statements of fact by defendant.
Defendant next contends that its statements were mere opinions and as such, are not actionable under the Lanham Act. "Absent a clear and unambiguous ruling from a court or agency of competent jurisdiction, statements by laypersons that purport to interpret the meaning of a statute or regulation are opinion statements, and not statements of fact. Statements of opinion are not generally actionable under the Lanham Act." Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 731 (9th Cir. 1999). By comparison, statements that are literally false, or, though literally true, likely to confuse or mislead consumers are actionable under the Lanham Act. Groden v. Random House, 61 F.3d 1045, 1051 (2d Cir. 1995); see also Coastal, 173 F.3d at 731 (stating that an actionable statement under the Lanham Act is one that is "specific and measurable... capable of being proved false or of being reasonably interpreted as a statement of objective fact").
Plaintiff alleges defendant made the following false, specific and measurable statements with respect to the Healy System: ARB found 22% failure rate; one in four nozzles must be replaced; assist nozzles contribute to site maintenance costs; and the problem in the majority of false alarm cases are in the nozzles. (FAC ¶ 28.) Accepting plaintiff's allegations as true, these assertions represent misdescriptions of specific or absolute characteristics of the Healy System and as such, are not mere opinions. Furthermore, defendant's contention that its statements represent an opinion about the ARB regulations is unavailing; as noted above, plaintiff alleges defendant's false statements represent factual assertions about the Healy System. (FAC ¶ 24.)
Alternatively, defendant argues its statements constitute mere puffery, rendering them immune from liability under the Lanham Act. Puffery is often described as "involving outrageous generalized statements, not making specific claims, that are so exaggerated as to preclude reliance by consumers." Cook, 911 F.2d at 246. For example, "advertising which merely states in general terms that one product is superior is not actionable." Id.; see also Lipton v. Nature Co., 71 F.3d 464, 474 (1965) (stating "[s]ubjective claims about products, which cannot be proven either true or false, are not actionable under the Lanham Act"). Conversely, "misdescriptions of specific or absolute characteristics of a product are actionable." Cook, 911 F.2d at 246. The Ninth Circuit has expressly recognized the propriety of a Rule 12(b)(6) motion to dismiss to determine whether or not a statement is non-actionable puffery. Id. at 245.
In this case, defendant's alleged statements, identified above, constitute more than mere generalizations; they represent specific characterizations about the Healy System which, if true, are "mischaracterizations" beyond the scope of mere puffery. See Cook, 911 F.2d at 246.
Finally, defendant contends that plaintiff has not adequately alleged injury to its business. However, plaintiff claims that, as a result of defendant's actions, it has suffered direct diversion of sales and/or lessening of the goodwill associated with its products. (FAC ¶ 40.) Such allegations are sufficient to plead damages under the controlling law. Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997) (holding that to state a claim for false advertising in violation of the Lanham Act, a plaintiff must plead that it 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).
For all of the above reasons, defendant's motion to dismiss plaintiff's claim under § 1125(a) of the Lanham Act is DENIED.
B. Trade Libel
Plaintiff's second cause of action is for trade libel. Plaintiff alleges that defendant: (1) disparaged the quality and performance of the Healy System by falsely stating that one in four Healy Systems fail and that the Healy System caused the false alarms; (2) made the false statements knowingly and with reckless disregard for their truth or falsity; (3) intentionally distributed the Marketing Materials to distributers of the Healy System and Incon ISD; and (4) knew or had reason to know that the false statements would cause pecuniary loss to plaintiff, all of which resulted in the reduction in plaintiff's market share, leading to millions of dollars in lost profits. (FAC ¶¶ 43-49.)
Defendant contends that plaintiff has failed to state a claim for trade libel because: (1) defendant's statements are privileged under the First Amendment and California law, and (2) plaintiff has not alleged special and particularized damages. "Trade libel is defined as an intentional disparagement of the quality of property, which results in pecuniary damage to plaintiff." Erlich v. Etner, 224 Cal. App. 2d 69, 73 (1964). To plead a claim for trade libel, a plaintiff must show (1) a statement that (2) was false, (3) disparaging, (4) published to others in writing, (5) induced others not to deal with it, and (6) caused special damages. New.Net, Inc. v. Lavasoft, 356 F. Supp. 2d 1090, 1113 (C.D. Cal. 2004). Under federal pleading requirements, "when items of special damages are claimed, they shall be specifically stated." Fed. R. Civ. P. 9(g); see also New.Net, 356 F. Supp. at 1113 (stating that with respect to special damages, "bare allegation of the amount of pecuniary loss is insufficient for the pleading of a trade libel claim"). Furthermore, if the plaintiff alleges special damages based on a general loss of customers, the plaintiff should prove "facts showing an established business, the amount of sales for a substantial period preceding the publication, the amount of sales subsequent to the publication, [and] facts showing that such loss in sales were the natural and probable result of such publication." New.Net, 356 F. Supp. at 1113; see also Allen v. The Ghoulish Gallery, No. 06cv371 NLS, 2007 U.S. Dist. LEXIS 86224, *48-49 (dismissing the plaintiff's trade libel claim because he did not show his sales numbers before and after the publication, and did not prove that the statement caused any alleged decline in sales).
Here, defendant moves to dismiss plaintiff's claim for trade libel, contending that plaintiff failed to allege with sufficient specificity its special damages. However, plaintiff states that it has suffered lost sales, evidenced by its decreased market share from 95% to 50%-75%. (FAC ¶ 48.) Plaintiff further alleges that this decrease in sales and market share occurred because of defendant's dissemination of the false Marketing Materials. (Id.) As such, the court finds that plaintiff has sufficiently pled special damages.
Furthermore, defendant's claim of immunity under the First Amendment and California law also fails. "Under California law, 'First amendment limitations are applicable to all claims, of whatever label, whose gravamen is the alleged injurious falsehood of a statement.'" Films of Distinction v. Allegro Film Prods., 12 F. Supp. 2d 1068, 1082 (C.D. Cal. 1998) (citations omitted). "If the defendants' statements about the plaintiff's product or service are protected opinion, the cause of action for trade libel must fail." Id. "Only false statements of fact are subject to defamation or trade libel liability; statements of opinion are protected by the First Amendment unless they 'imply a false assertion of fact.'" Vondran v. McLinn, No. C 95-20296 RPA, 1995 U.S. Dist. LEXIS 21974, *14-15 (citing Milkovich v. Lorain Journal Co., 497 U.S. 1, 19 (1990)). "In addition, the First Amendment protects statements of rhetorical hyperbole, subjective views and conjecture, but not statements based on objectively verifiable facts." Id. at *15. Thus, where statements are capable of being proven true or false, they are not expressions of opinion and therefore are not protected by the First Amendment. Id. As stated above, the statements plaintiff identifies as constituting trade libel are factual statements that may be proven true or false. (See FAC ¶ 28.) As such, defendant's argument that its assertions were mere opinion and thus protected by the First Amendment must fail.
Finally, defendant's competition-privilege argument is likewise unavailing.
California law has long recognized a 'competition privilege' which protects one from liability for inducing a third person not to enter into a prospective contractual relation with a business competitor. The privilege applies where '(a) the relation [between the competitor and third person] concerns a matter involved in the competition between the actor and the competitor, and (b) the actor does not employ improper means, and (c) the actor does no intend thereby to create or continue an illegal restraint of competition, and (d) the actor's purpose is at least in part to advance his interest in his competition with the other.' In short, the competition privilege furthers free enterprise by protecting the right to compete fairly in the marketplace.
Gemini Aluminum Corp. v. Cal. Custom Shapes, Inc., 95 Cal. App. 4th 1249, 1256 (2002) (emphasis in original). Where a plaintiff alleges that the defendant competed through improper or illegal means, the competition privilege does not apply. Id.; see also Consortium Info. Servs. v. Experian Info. Solutions, G037712, 2007 Cal. App. Unpub. LEXIS 7200, *15-16 (Sep. 5, 2007) (holding that because plaintiff alleged defendant competed through the improper means of trade libel, the competition privilege did not apply).
Here, plaintiff has alleged that defendant competed through improper means; specifically, by accusing defendant of competing with "reckless disregard" or "knowledge of [the] falsity" of its statements and by incorporating its previous allegation that defendant competed through trade libel. (FAC ¶¶ 43, 45.) As such, defendant's argument that plaintiff's claim is barred by the competition-privilege is without merit.
For these reasons, defendant's motion to dismiss plaintiff's trade libel claim is DENIED.
C. False Advertising
Plaintiff's third cause of action is for false advertising pursuant to California Business and Professions Code § 17500. Specifically, plaintiff alleges defendant's false and misleading statements contained in the Marketing Materials are likely to deceive or have the tendency to deceive a substantial segment of those who see or hear them, resulting in direct diversion of sales and/or lessening of the goodwill associated with plaintiff's product.
Defendant contends that plaintiff has not stated a claim for false advertising because the relevant statements are not false or misleading and are statements of opinion, rather than fact.
Section 17500 of California's Business and Professions Code makes it unlawful for a business to disseminate any statement "which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading..." Cal. Bus. & Prof. Code § 17500. This provision has been "interpreted broadly to embrace not only advertising which is false, but also advertising which although true, is either actually misleading or which has a capacity, likelihood or tendency to deceive or confuse the public." Leoni v. State Bar, 39 Cal. 3d 609, 626 (1985). Whether the public actually has been or will be misled for purposes of a claim under the false advertising law is, in general, a factual question that cannot be resolved on a motion to dismiss. Cairns v. Franklin Mint Co., 24 F. Supp. 2d 1013, 1037 (C.D. Cal. 1998).
However, "[g]eneralized, vague, and unspecified assertions constitute 'mere puffery' upon which a reasonable consumer could not rely, and hence are not actionable." Anunziato v. eMachines Inc., 402 F. Supp. 2d 1133, 1139 (C.D. Cal. 2005) (citing Glen Holly Entm't, Inc. v. Tektronix Inc., 343 F.3d 1000, 1005 (9th Cir. 2003)); see also Summit Tech., Inc. v. High-Line Med. Instruments, Co., 933 F. Supp. 918, 931 (C.D. Cal. 1996) (stating "[p]uffery is often described as involving outrageous generalized statements, not making specific claims, that are so exaggerated as to preclude reliance by consumers"). However, where at least some actionable statements have been pled, a claim cannot be dismissed on the ground that some statements constitute mere puffery. Anunziato, 402 F. Supp. at 1139.
Finally, with respect to issues of public concern, one may not "immunize false or misleading product information from government regulation simply by including references to public issues." Kasky v. Nikey, Inc., 27 Cal. 4th 939, 966 (citing Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 68 (1983)). Indeed, advertising which "'links a product to a current public debate' is not thereby entitled to the constitutional protection afforded noncommercial speech." Bolger, 463 U.S. at 68.
As set forth above, the false statements that defendant allegedly disseminated through the Marketing Materials include allegations that go beyond mere puffery, or "generalized statements." Furthermore, defendant's attempt to protect its alleged statements by asserting that its statements are constitutionally protected because they touch upon matters of "public concern" must also fail. Regardless of whether defendant's statements can be characterized as touching upon a public debate, they nevertheless concern allegedly "false or misleading product information." As such, defendant cannot invoke constitutional immunity simply by "including reference to public issues." See Kasky, 27 Cal. 4th at 966.
Accordingly, defendant's motion to dismiss plaintiff's false advertising claim is DENIED.
D. Unfair Competition
Plaintiff's fourth claim for relief is for unfair competition pursuant to California Business and Professions Code § 17200. Specifically, plaintiff claims that because defendant's conduct allegedly constitutes a violation of the Lanham Act and also significantly threatens or harms competition through the use of unfair, deceptive, untrue, and misleading advertising, defendant has violated Section 17200.
Defendant contends that plaintiff has not adequately asserted a claim under Section 17200 because it has failed to meet the California pleading standard of stating with reasonable particularity the facts supporting the statutory elements of the violation.
Under Section 17200, "unfair competition is defined to include 'unlawful, unfair, or fraudulent business practice and unfair, deceptive, untrue or misleading advertising.'" Summit Tech. v. High-Line Medical Instruments, Co., 933 F. Supp. 918, 942 (C.D. Cal. 1996) (citing People v. McKale, 25 Cal. 3d 626, 631-32 (1979)). "It is broadly defined to include 'anything that can properly be called a business practice and that at the same time is forbidden by law.'" Id. (citations omitted). Indeed, "[f]alse and misleading representations necessarily constitute unfair business practices within the meaning of that statute. This section is designed to protect consumers against fraud and deceit as well as to protect competitors, and is broadly interpreted to bar all ongoing wrongful business activity in any context in which it appears." People v. Dollar Rent-A-Car Sys., 211 Cal. App. 3d 119, 129 (1989). Furthermore, under Section 17200, a plaintiff "may address violations of the California Sherman Act, California Legal Remedies Act, the Lanham Act (so long as the Lanham Act claims are not merely vehicles for claims under the FDCA or FDA regulations), and Cal. Bus. & Prof. Code § 17500." Summit Tech., 933 F. Supp. at 943.
With respect to pleading unfair competition, "[w]hile the elements of the UCL Claim derive from state substantive law, the degree of specificity required is governed by the Federal Rules of Civil Procedure." Silicon Image, Inc., v. Analogix Semiconductor, Inc., No. C-07-0635 JCS, 2007 U.S. Dist. LEXIS 39599, *9 (N.D. Cal. May 16, 2007) (citing Taylor v. U.S., 921 F.2d 1428, 1432 (9th Cir. 1987)). "Under Rule 8(a), a plaintiff is required to provide only a 'short and plain statement of the claim showing that the pleader is entitled to relief.'" Id. Thus, so long as the claim alleges the theory upon which the UCL claim is based, it is sufficient to meet the "fair notice" requirement under Rule 8(a). See id. at *10.
Here, because plaintiff bases its unfair competition claim upon allegedly false and misleading statements disseminated by defendant and also predicates its claim on its assertion of a violation of the Lanham Act, the court finds that plaintiff has sufficiently pled its fourth cause of action. Thus, defendant's motion to dismiss plaintiff's claim for unfair competition is DENIED.
E. Intentional Interference with Prospective Economic Relations
Plaintiff's fifth cause of action is for intentional interference with prospective economic relations. Defendant contends that plaintiff has not sufficiently pled this claim because it has not alleged defendant actually disrupted an economic relationship using "wrongful" means and that, but for the interference, there was a reasonable probability that a contract would have been obtained.
"To state a claim for intentional interference with economic advantage, plaintiff must allege: (1) an existing economic relationship or one 'containing the probability of future economic benefit'; (2) knowledge by the defendant of the relationship; (3) acts by defendant designed to disrupt the relationship; (4) actual disruption of the relationship; (5) damages proximately caused by the acts of the defendant. Accuimage Diagnostics Corp. v. Terarecon, Inc., 260 F. Supp. 2d 941, 956 (N.D. Cal. 2003). The California Supreme Court has added what functions as a sixth element that "the act must be 'wrongful by some legal measure other than the fact of the interference itself." Id. (citing Della Penna v. Toyota Motor Sales, U.S.A., 11 Cal. 4th 376, 393 (1995)). "Thus, it is 'plaintiff['s] burden to prove, as an element of the cause of action itself, that the defendant['s] conduct was independently wrong." Id. "An act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, regulatory, common law, or other determinable legal standard." Korea Suplly Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1159 (2003). Thus, because a plaintiff need only plead and prove that the alleged conduct is unlawful for reasons other than that it interfered with a prospective economic advantage, pleading a UCL violation may supply the requisite independently wrongful act. See CRST Van Expedited, Inc. v. Werner Enters., 479 F.3d 1099, 1109-10 (citing Stevenson Real Estate Servs, Inc. v. CB Richard Ellis Real Estate Servs, Inc., 138 Cal. App. 4th 1215, 1224 (2006)).
As set forth above, because the court does not dismiss plaintiff's other causes of action based on the same alleged wrongdoing by defendant, plaintiff's claim for intentional interference with prospective economic relations also survives since these other causes of action sufficiently allege "independently wrongful conduct."
Furthermore, to the extent defendant seeks to dismiss this claim for failure to allege that plaintiff's damages were proximately caused by defendant, the court finds plaintiff has sufficiently pled this element as well. Plaintiff alleges that by disseminating the false statements contained in the Marketing Materials, defendant intentionally interfered with its prospective economic relationships by inducing its customers to refrain from purchasing Franklin's products or otherwise conducting business with Franklin, and that as a result, Franklin suffered damages. (FAC ¶¶ 69, 72.) Assuming these allegations to be true, the court finds plaintiff's pleading sufficient.
Accordingly, defendant's motion to dismiss plaintiff's claim for intentional interference with prospective economic relations is DENIED.
For the foregoing reasons, defendant's motion to dismiss pursuant to Rule 12(b)(6) is DENIED in its entirety.
IT IS SO ORDERED.