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Swiss America Trading Corporation v. Regal Assets, LLC

United States District Court, C.D. California

February 13, 2015



DEAN D. PREGERSON, District Judge.

Presently before the court is Defendants Regal Assets, LLC ("Regal") and Tyler Gallagher ("Gallgher, " collectively, "Defendants)'s Motion to Dismiss. Having considered the submissions of the parties and heard oral argument, the court denies the motion and adopts the following order.

I. Background

Plaintiff Swiss America Trading Corporation ("Plaintiff" or "Swiss") competes with Defendant Regal in the field of precious metal sales. (Complaint ¶ 1.) Plaintiff promotes itself online and relies upon internet reviews and recommendations to generate business, as does Regal. (Id. ¶¶ 19, 24.)

Swiss alleges that Defendant Regal operates an affiliate marketing program, through which paid affiliates promote Regal on affiliates' websites. (Compl. ¶¶ 22, 25.) Affiliates' promotional efforts include both advertisements and reviews. (Id. ¶ 22.) The Complaint alleges, however, that Regal owns, operates, or otherwise controls its affiliates' websites, which include ostensibly independent consumer reviews that disparage Swiss, make false statements, including completely fabricated reviewer identities and credentials, and recommend Regal over Swiss. (Id. ¶¶ 25-34.)

The Complaint alleges causes of action for false and misleading advertising under the Lanham Act, 15 U.S.C. 1125(a), and state law, as well as state law causes of action for unfair competition, trade libel, and intentional interference with prospective economic advantage. Defendants now move to dismiss.

II. Legal Standard

A complaint will survive a motion to dismiss when it contains "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When considering a Rule 12(b)(6) motion, a court must "accept as true all allegations of material fact and must construe those facts in the light most favorable to the plaintiff." Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). Although a complaint need not include "detailed factual allegations, " it must offer "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678. Conclusory allegations or allegations that are no more than a statement of a legal conclusion "are not entitled to the assumption of truth." Id. at 679. In other words, a pleading that merely offers "labels and conclusions, " a "formulaic recitation of the elements, " or "naked assertions" will not be sufficient to state a claim upon which relief can be granted. Id. at 678 (citations and internal quotation marks omitted).

"When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement of relief." Id. at 679. Plaintiffs must allege "plausible grounds to infer" that their claims rise "above the speculative level." Twombly, 550 U.S. at 555. "Determining whether a complaint states a plausible claim for relief" is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.

III. Discussion

A. False Advertising

Defendants first contend that Swiss' False Advertising claims are insufficient because the Complaint fails to satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). The Ninth Circuit has not addressed the issue whether Rule 9 applies to false advertising claims, and district courts are divided on the issue. See, e.g., Western Sugar Co-op v. Archer-Daniels-Midland Co., No. CV 11-3473 CBM, 2012 WL 3101659 *3 (C.D. Cal. Jul. 31, 2012).

This court, however, need not resolve the disagreement, as the Complaint satisfies even Rule 9s heightened standard, which "only requires the identification of the circumstances constituting fraud so that the defendant can prepare an adequate answer from the allegations." Walling v. Beverly Enters., 476 F.2d 393, 397 (9th Cir. 1973). Here, the Complaint clearly alleges that (1) Regal's websites falsely represent themselves as independent of Regal, then criticize Plaintiff and recommend Regal (Compl. ¶¶ 27-30); (2) Regal sites use false information to give the impression of trustworthiness, including fabricated reviewer identities and backgrounds, such as that of "Mark C. Turner." (Compl. ¶¶ 32-33.); and (3) Regal makes false, disparaging statements about Swiss, including claims that Swiss has been accused of baiting and switching, "steering" customers away from worthwhile investments, and irrationally emphasizing coins over bullion. (Compl. ¶¶ 34, Ex. 5.) These allegations are sufficient to allow Defendants to mount an adequate defense.

Next, Defendants argue that the alleged misrepresentations are mere puffery. This argument is not persuasive. Puffery is "exaggerated advertising, blustering, and boasting upon which no reasonable buyer would rely." Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1145 (9th Cir. 1997). Puffery is typically comprised of vague, exaggerated, generalized, or subjective statements. County of Marin v. Deloitte Consulting LLP, 836 F.Supp.2d 1030, 1039 (N.D. Cal. ...

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