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The Gerson Institute, A California Non-Profit Organization v. Adam Huntington

March 10, 2011

THE GERSON INSTITUTE, A CALIFORNIA NON-PROFIT ORGANIZATION, PLAINTIFF,
v.
ADAM HUNTINGTON, AN INDIVIDUAL, DEFENDANT.



The opinion of the court was delivered by: Honorablelarryalanburns United States District Judge

MOTION TO DISMISS ORDER GRANTING IN PART

The Gerson Institute is an organization that promotes alternative treatment of disease. One of its business ventures is the sale of books and other materials on various nutrition-and health-related topics. Gerson hired Adam Huntington to help promote its organization and market its books. After the business relationship between Gerson and Huntington broke down, Gerson brought this action against Huntington, raising federal trademark and copyright claims, as well as various state claims arising from the business relationship.

Huntington moved to dismiss the original complaint, arguing both that Gerson failed to state a claim and that the Court lacked jurisdiction. The Court granted the motion and dismissed the complaint with leave to amend. Gerson then filed an amended complaint ("FAC"), and Huntington again moved to dismiss based on lack of jurisdiction. Huntington also requests an award of attorney's fees.

I. Background

The following statement of facts is taken from the allegations in the FAC. Gerson, a small nonprofit organization, alleges it owns and has registered the copyright in five works (the "Registered Works"), which it sells on its website, as well as the mark "GERSON" for prerecorded audiocassettes and videocassettes. Gerson also sells other works, such as newsletters, in which it holds the copyright. The FAC doesn't specify the medium or media in which the Registered Works were made available, but some were sold as digital works. (FAC, ¶ 27.) Gerson also sells works by Charlotte Gerson, who has granted marketing rights to Gerson. (Id., ¶ 12.)

Gerson hired Huntington as a "Resource Development Specialist," beginning September 4, 2007. His duties included fundraising, and promoting Gerson, Gerson's therapeutic technique and philosophies, and Gerson's publications. His "primary focus was to increase Gerson's income through several sources." (FAC, 4:17--18.) The FAC doesn't say what those sources were, but it goes on to name other things he was responsible for, which included website updates and website improvements, and online sales accounts. (Id., ¶¶ 20, 21, 24, 26, 27, 109, 110.) Gerson provided Huntington with its bank accounts and passwords, and left him unsupervised, trusting him to perform at an executive level. (Id., ¶ 109.) The amended complaint doesn't specifically allege the terms of Huntington's employment, but does attach as exhibits the engagement letter and the transcript of an interview with Huntington in which Gerson's executive director Anita Wilson also participated.

Huntington opened a PayPal account in the Gerson name to enable customers to buy Gerson's products online with credit cards. (FAC, ¶ 24.) He also set up an account on a website called PayLoadz using the Gerson name to sell Gerson copyrighted material. (Id. ¶ 27.) Huntington told Gerson these changes would benefit it by increasing and speeding up sales. (Id., ¶ 28.) In fact, Gerson alleges, Huntington failed to increase Gerson's revenue, and instead redirected revenue to himself. (Id.)

Gerson charges Huntington with secretly setting up one or more alternate accounts to receive funds from the sales, so that the money went to him personally instead of to Gerson. (FAC, ¶ 30, 32.) Gerson also alleges Huntington used Gerson's trademark as metatags and metatext, to drive traffic to websites he controlled. (Id., ¶38.) Gerson argues this infringed both its copyrights and trademark, because Huntington was not authorized to sell Gerson's books for his own benefit, only for Gerson's.

Gerson also says Huntington unauthorizedly misdesignated the Registered Works as being authored by "Health Matters" instead of by their true authors, the Hildebrands and the United Kingdom Gerson Support Group. (FAC, ¶ 31.) A printout of the PayLoadz website page is attached as an exhibit to the complaint.

Gerson became dissatisfied with Huntington's performance and allegedly terminated his employment February 10, 2008, just over five months after it had hired him. (FAC, ¶ 18.) Gerson alleges Huntington continued his infringing behavior after his employment terminated (FAC, ¶ 40), it continued through the date of the filing of the FAC, i.e., February 23, 2010 (Id., ¶ 61), and it is likely to continue into the future. (Id., ¶¶ 45, 49, 50, 64.)

II. Legal Standards

A Rule12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964 (May 21, 2007), quoting Conley v. Gibson, 355 U.S. 41, 47 (1957).

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 "grounds" of his "entitle[ment] to relief" requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. . . . Factual allegations must be enough to raise a right to relief above the speculative level

Bell Atlantic, 127 S.Ct. at 1964--65 (citations omitted). "[S]ome threshold of plausibility must be crossed at the outset" before a case is permitted to ...


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