Opinion
CV 22-4735-RSWL-Ex
12-12-2022
TRACY ANDERSON MIND AND BODY, LLC, et al., Plaintiffs, v. MEGAN ROUP, et al., Defendants.
ORDER RE: MOTION TO DISMISS AND MOTION TO STRIKE [15]
HONORABLE RONALD S.W. LEW SENIOR U.S. DISTRICT JUDGE
Plaintiffs Tracy Anderson Mind and Body, LLC (“Plaintiff TAMB”) and Studio New York LLC (“Plaintiff TANY”) (collectively, “Plaintiffs”) brought the instant Action against Defendants Megan Roup (“Defendant Roup”) and The Sculpt Society (“Defendant TSS”) (collectively, “Defendants”) alleging copyright infringement, violation of the Lanham Act, breach of contract, and violation of unfair competition law. Currently before the Court is Defendants' Motion to Dismiss [15].
Having reviewed all papers submitted pertaining to this Motion, the Court NOW FINDS AND RULES AS FOLLOWS: the Court GRANTS Defendants' Motion to Dismiss Plaintiffs' Lanham Act and UCL claims with leave to amend and DENIES Defendant's Motion to Dismiss Plaintiffs' copyright and breach of contract claims.
I. BACKGROUND
A. Factual Background Plaintiffs allege the following in their Complaint:
Tracy Anderson (“Anderson”) developed the Tracy Anderson Method (“TA Method”)-routines combining choreography, fitness, and cardiovascular movement-after decades of research, development, testing, and investment. First Am. Compl. (“FAC”) ¶ 1, ECF No. 12. Anderson is the founder and CEO of Plaintiff TAMB, which offers choreography-based fitness and mat movement classes. Id. ¶ 2. In turn, Plaintiff TAMB is the owner of registered copyrights to various media, including DVDs created by and featuring Anderson, that express, relate to, or are based on, the TA Method. Id.
In 2011, Plaintiff TANY, a subsidiary under Plaintiff TAMB, which is also owned by Anderson, employed Defendant Roup as a trainer. Id. ¶ 3. Defendant Roup was required to sign a Trainer Agreement upon employment. Id. The Trainer Agreement prohibits trainers from using or disclosing the company's confidential information, which includes “nonpublic business and operation information, training materials and manuals, and transcribed methods . . . including those comprising the TA Method's proprietary choreography movements.” Id.
During Defendant Roup's six-year employment with Plaintiff TANY, Defendant Roup learned and had access to significant confidential information, including “(i) training materials, choreography transcriptions, and custom write-ups related to the performance and teaching of the TA Method, and (ii) business information, customer lists, and operating procedures.” Id. ¶ 4.
Later, in or around February 2017, Defendant Roup terminated her employment with Plaintiff TANY and founded Defendant TSS the next month. Id. ¶ 5. Defendant TSS also offers “choreography-based fitness and mat movement classes that directly compete with Plaintiffs[' classes].” Id. In creating and operating Defendant TSS, Defendant Roup neither references her association with Plaintiffs, nor credits Plaintiffs for training, teaching, or developing Defendant Roup. Id. ¶ 7. Plaintiffs thus filed the current Action seeking damages and injunctive relief for copyright infringement, breach of contract, violation of the Lanham Act, and unfair competition. Id. ¶ 10.
B. Procedural Background
Plaintiffs filed their First Amended Complaint [12] on September 13, 2022. Defendants then filed the instant Motion [15] on September 27, 2022. Plaintiffs opposed [17] the Motion on October 11, 2022, and Defendants replied [18] on October 18, 2022.
II. DISCUSSION
A. Legal Standard
1. Motion to Dismiss
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows a party to move for dismissal of one or more claims if the pleading fails to state a claim upon which relief can be granted. A complaint must “contain 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) (quotation omitted). Dismissal is warranted for a “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 902 F.2d 696, 699 (9th Cir. 1988) (citation omitted).
In ruling on a 12(b)(6) motion, a court may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice. Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court must presume all factual allegations of the complaint to be true and draw all reasonable inferences in favor of the non-moving party. Klarfeld v. United States, 944 F.2d 583, 585 (9th Cir. 1991). The question is not whether the plaintiff will ultimately prevail, but whether the plaintiff is entitled to present evidence to support its claims. Jackson v. Birmingham Bd. of Educ., 544 U.S. 167, 184 (2005) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). While a complaint need not contain detailed factual allegations, a plaintiff must provide more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a recovery is very remote and unlikely.'” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
2. Motion to Strike
California's anti-Strategic Lawsuit Against Public Participation (“anti-SLAPP”) statute provides for a special motion to strike state law claims brought “primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances.” Cal. Civ. Proc. Code § 425.16(a). “A court considering a motion to strike under the anti-SLAPP statute must engage in a two-part inquiry.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1110 (9th Cir. 2003). “First, a defendant must make an initial prima facie showing that the plaintiff's suit arises from an act in furtherance of the defendant's rights of petition or free speech.” Id. (internal quotation marks and citation omitted). “Second, once the defendant has made a prima facie showing, the burden shifts to the plaintiff to demonstrate the probability of prevailing on the challenged claims.” Id. (internal quotation marks and citation omitted).
B. Analysis
1. Rule 12(b)(6) Motion
a. Copyright Infringement
Plaintiffs bring a claim against Defendant for copyright infringement. FAC ¶¶ 50-56. “To establish infringement, two elements must be proven: (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.” Feist Publ'ns., Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 361 (1991). A copyright registration is “prima facie evidence of the validity of the copyright and the facts stated in the certificate.” 17 U.S.C. § 410(c). While an “accused infringer can rebut [the] presumption of validity” conferred by a copyright registration, “such a presumption is strong in a motion to dismiss since the court must assume all factual allegations are true.” Datastorm Techs., Inc. v. Excalibur Commc'ns, Inc., 888 F.Supp. 112, 115 (N.D. Cal. 1995). To show copying, a plaintiff can rely on circumstantial evidence that the defendant had access to the copyrighted work and that there is substantial similarity between defendant's work and copyrighted work. Swirsky v. Carey, 376 F.3d 841, 844 (9th Cir. 2004).
Here, Plaintiffs adequately pled a prima facie case of copyright infringement. First, Plaintiffs provided a list of copyright registrations for nineteen “Motion Picture[s]" for which Plaintiff TAMB is the sole copyright claimant. FAC, Attachment A, ECF No. 12-1. Next, Plaintiffs alleged that Defendants have published videos that “infringe on [Plaintiff TAMB's] copyrights by copying the choreography movements, sequences, and routines depicted in the [copyrighted works]; organizational structure and format of the [copyrighted works]; and aesthetic elements depicted in the [copyrighted works].” FAC ¶ 47. Moreover, Plaintiffs contend that Defendants had access to the copyrighted works through Defendant Roup's employment with Plaintiffs and specify that at least three of Defendant' videos are substantially similar to Plaintiff's copyrighted works. Id. ¶¶ 3-4, 48-49. Therefore, Plaintiffs have pled a prima facie case of copyright infringement. See Wake Up & Ball LLC v. Sony Music Ent. Inc., 119 F.Supp.3d 944, 952 (D. Ariz. 2015) (finding that plaintiff pled a plausible infringement claim by presenting its copyright registration and alleging that defendants published plaintiff's copyrighted work online).
Under certain circumstances, a court ruling on a motion to dismiss may independently assess whether works are not substantially similar. See Christianson v. West Pub. Co., 149 F.2d 202, 203 (9th Cir. 1945) (“There is ample authority for holding that when the copyrighted work and the alleged infringement are both before the court, capable of examination and comparison, non-infringement can be determined on a motion to dismiss."). Here, however, the Court cannot properly examine and compare the works to determine non-infringement. Plaintiffs have provided three examples broadly describing how Defendants' “choreography movement, sequences, and routines are substantially similar" to those depicted in Plaintiffs' copyrighted works. FAC ¶ 48. But Plaintiffs did not submit the referenced videos with their FAC. See generally FAC. Moreover, Plaintiffs state that “[b]ecause Defendants' videos are published behind a paywall," Plaintiffs are “unable to review and compare every one of Defendants' videos" with their own, and therefore, “the full extent of Defendants' infringement . . . cannot be assessed until Defendants produce the videos to Plaintiffs in discovery." Id. ¶ 49. Consequently, the Court is unable to determine noninfringement at this stage of litigation.
Defendants, however, argue that Plaintiffs have not pled a prima facie case of copyright infringement because “functional exercise movements are not copyrightable.” Defs.' Mot. to Dismiss (“Mot.”) 7:1214., ECF No. 15. Plaintiffs counter that (1) whether a copyrighted work qualifies for copyright protection is a factual inquiry not appropriate for determination on a motion to dismiss, and (2) regardless, Plaintiffs' choreographic work is copyrightable. Plfs.' Opp'n (“Opp'n”) 5:21-21, 8:6-8. The Court agrees that an inquiry into the copyrightability of Plaintiffs' works is not appropriate at this stage of litigation.
As explained, when assessing a motion to dismiss, the Court “must assume all factual allegations [in the Complaint] are true.” Datastorm Techs., Inc., 888 F.Supp. at 115. Accordingly, motion to dismiss arguments that copyrighted works do not qualify for copyright protection based on a “detailed factual analysis” of the works are “inappropriate . . . as the Court must accept all material factual allegations as true.” Thomson v. HMC Grp., No. CV1303273DMGVBKX, 2014 WL 12589312 at *3 (C.D. Cal. Feb. 18, 2014) (holding that motion to dismiss arguments regarding copyrightability are premature and such arguments should instead be asserted at summary judgment); see also P & P Imports, LLC v. Festival Trading, Inc., No. CV171541DOCJCGX, 2018 WL 5099723 at *6 (C.D. Cal. May 15, 2018) (declining to assess copyrightability of a copyrighted work on a motion to dismiss); E. W. Sounds, Inc. v. Phoenix, No. CV 12-6143 CAS AJWX, 2012 WL 4003047 at *3 (C.D. Cal. Sept. 10, 2012) (same).
In Thomson, the defendant asserted that the copyrighted works did not qualify for copyright protection because they were “functional” designs that amounted to “[mere] ideas and concepts.” Thomson, 2014 WL 12589312 at *3. There, the court held that determining whether the copyrighted works fell into the specified categories would require “a detailed factual analysis” inappropriate for a motion to dismiss. Id. Similarly, here, Defendants contend that Plaintiffs' copyrighted works are not copyrightable because they are “functional exercise movements” that are ultimately “unprotectable ‘ideas' or ‘processes.'” Mot. 7:12-24. As in Thomson, determining the protectability of Plaintiffs' copyrighted works would require the Court to conduct a detailed factual analysis unfit for ruling on a motion to dismiss. Thus, Defendants' argument fails, and Plaintiffs have met their burden of pleading copyright infringement. See Ashcroft, 556 U.S. 662 at 678 (holding that a complaint must contain enough factual sufficiency to be plausible on its face to survive a motion to dismiss for failure to plead a claim); see also Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (“[F]actual challenges to a plaintiff's complaint have no bearing on the legal sufficiency of the allegations under Rule 12(b)(6).”). Accordingly, the Court DENIES Defendants' Motion to Dismiss Plaintiffs' copyright infringement claim.
b. Violation of the Lanham Act - False Advertising
To succeed on a Lanham Act claim for false advertising, a plaintiff must establish: (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. See 15 U.S.C. § 1125.
Importantly, district courts in the Ninth Circuit apply a heightened pleading standard for false advertising claims. See, e.g., EcoDisc Tech. AG v. DVD Format/Logo Licensing Corp., 711 F.Supp.2d 1074, 1085 (C.D. Cal. 2010) (“Although the Ninth Circuit has not concluded that Rule 9(b) applies to Lanham Act claims, many district courts have applied this heightened pleading standard to claims that are grounded in fraud, such as misrepresentation claims.”). “To satisfy Rule 9(b), Plaintiff must state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation.” EcoDisc Tech., 711 F.Supp.2d at 1085 (citing Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). Plaintiffs must also set forth what is false and misleading about the statement and why it is false. Id. (citing Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir.2003)).
Plaintiffs alleged all elements of a Lanham Act violation with sufficient particularity, specifically listing the following “false and/or misleading” statements from Defendant Roup's biography on Defendants' website: “I knew that there was something missing from the boutique fitness community, so I combined my passion for dance and love for fitness to create The Sculpt Society. I spent years teaching fitness and developing The Sculpt Society method before launching in 2017.” FAC ¶ 58. Plaintiffs assert that these statements “misrepresent the nature, characteristics, and qualities of Defendants' services” because they “imply” that (1) Defendant Roup developed the “TSS Method” over a period of multiple years, when she did not; (2) the “TSS Method” was created through years of science-based research, development, data collection, analysis, and trial and error, when it was not; and (3) the “TSS Method” is significantly different from Plaintiffs' “TA Method,” when it is not. Id. ¶ 58, 59.
Defendants counter that these statements are “facially non-actionable” because, amongst other reasons, (1) they are “classic examples of non-actionable opinions or puffery which are both nonmaterial and unlikely to induce consumer reliance,” and (2) they are non-material because a reasonable consumer would not rely on the statements when making purchasing decisions. Mot. 12:22-17:25.
The Court's analysis therefore centers on whether Plaintiff has plausibly alleged a false statement of fact.
i. False Statement of Fact
“To demonstrate falsity within the meaning of the Lanham Act, a plaintiff may show that the statement was literally false, either on its face or by necessary implication, or that the statement was literally true but likely to mislead or confuse consumers.” Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997). The allegedly false statement must be examined in the full context of the advertising or promotional materials in which the statement was made. Id.
Importantly, an advertising statement may be non-actionable if it constitutes “puffery,” which is defined as “exaggerated advertising, blustering, and boasting upon which no reasonable buyer would rely.” Id. at 1145. Puffery includes “statement[s] of fact [in]capable of being proved false,” statements that are not “specific and measurable,” or statements that otherwise cannot be “reasonably interpreted as a statement of objective fact.” Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 731 (9th Cir. 1999); see also Glen Holly Ent., Inc. v. Tektronix Inc., 343 F.3d 1000, 1015 (9th Cir. 2003) (establishing that “generalized, vague, or unspecific assertions” constitute unactionable puffery); Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 246 (9th Cir. 1990) (“[Puffery] has been described by most courts as involving outrageous generalized statements, not making specific claims, that are so exaggerated as to preclude reliance by consumers.”).
A statement is also considered puffery if the claim is extremely unlikely to induce consumer reliance. Newcal Indus., Inc. v. Ikon Off. Sol., 513 F.3d 1038, 1054 (9th Cir. 2008). Ultimately, the difference between a statement of fact and mere puffery rests in the specificity or generality of the claim. Cook, Perkiss & Liehe, Inc., 911 F.2d at 246. “The common theme that seems to run through cases considering puffery in a variety of contexts is that consumer reliance will be induced by specific rather than general assertions.” Id. Thus, a statement that is quantifiable, that makes a claim as to the “specific or absolute characteristics of a product,” may be an actionable statement of fact while a general, subjective claim about a product is non-actionable puffery. Id.
Courts may determine at the motion to dismiss stage whether an alleged misrepresentation is a statement of fact or mere puffery as a matter of law. Newcal Indus., Inc., 513 F.3d at 1053. Since Plaintiffs assert that Defendants' statements are “false and/or misleading,” the Court assesses whether the claims are literally false or true but misleading. FAC ¶ 58. A. Literally False
To be literally false, a statement must “expressly or impliedly assert a fact that is susceptible to being proved false,” and must be able to reasonably be “interpreted as stating actual facts.” Weller v. American Broad. Cos., 283 Cal.Rptr. 644, 650 (1991). Claims that a defendant invented a product to fill a gap in the market, and the resulting implications regarding the innovativeness of a defendant's product, constitute puffery rather than an assertion of fact. See Soilworks, LLC v. Midwest Indus. Supply, Inc., 575 F.Supp.2d 1118, 1133 (D. Ariz. 2008) (holding that claims that a company was the “innovator” of a product and that the product was the result of “revolutionary state-of- the-art innovation” constituted puffery because those claims are general, vague, and unmeasurable.); Williams & Lake LLC v. Genesis Systems LLC, No. CV-17-00117-TUC-CKJ, 2017 WL 6418937 at *6-8 (D. Ariz. Sept. 13, 2017) (establishing that “inventorship is not a cause of action” for false advertising under the Lanham Act, and that claims attacking defendant's statements about inventorship do not challenge the nature of the defendant's product even if the statements create a perception that the plaintiff's product is inferior).
Here, Defendant Roup's statements constitute non-actionable puffery. First, her statement that “[she] knew something was missing from the boutique fitness community, so [she] combined [her] passion for dance and love for fitness to create The Sculpt Society” conveys a general, vague, and unmeasurable assertion regarding inventorship and the innovativeness of Defendants' products. See Soilworks, LLC, 575 F.Supp.2d at 1133; Williams & Lake LLC, 2017 WL 6418937 at *6-8. Next, Defendant Roup's statement that she “spent years teaching fitness and developing The Sculpt Society method before launching in 2017” is another general and vague assertion of inventorship. While Plaintiffs appear to primarily take issue with Defendant Roup's statement about her development of The Sculpt Society method, it is worth noting that Plaintiffs offer evidence proving the truth of Defendant Roup's claim that she “spent years teaching fitness.” FAC ¶¶ 58-59; Id. ¶ 3 (“[Plaintiff] TANY employed [Defendant] Roup as a trainer from 2011 to 2017.”). Moreover, it is unlikely a reasonable consumer would rely on these statements as an objective, measurable statement of fact. See R & A Synergy LLC v. Spanx, Inc., No. 2:17-CV-09147-SVW-AS, 2019 WL 4390564 at * 11 (C.D. Cal. May 1, 2019) (holding that a CEO's representations that she invented a product and that it filled a “white space” in the market were puffery that would not induce consumer reliance).
B. True But Misleading
If an advertising claim is not literally false, a plaintiff may still satisfy the first element of a Lanham Act false advertising claim by establishing that the representations of fact in advertising statements were literally true but otherwise misled, confused, or deceived the public. Southland Sod, 108 F.3d at 1140. A plaintiff generally relies on consumer surveys to assess whether consumers were misled. Id.
Plaintiffs argue that Defendant Roup's statements may mislead the public to wrongly believe that (1) Defendant Roup developed the “TSS Method” over a period of multiple years, when she did not; (2) the “TSS Method” was created through years of science-based research, development, data collection, analysis, and trial and error, when it was not; and (3) the “TSS Method” is significantly different from Plaintiffs' “TA Method,” when it is not. FAC ¶ 58, 59. As explained above, Defendant Roup's statements are non-actionable puffery, meaning that reasonable consumers are unlikely to rely on these statements to make purchasing decisions regardless of whether the statements may be misleading. Thus, Defendant Roup's statements cannot be considered true but misleading as a matter of law.
Therefore, Plaintiffs have not adequately pled that Defendants have made a false statement of fact and the Court GRANTS Defendants' Motion to Dismiss Plaintiff's Lanham Act claim.
Since the Court resolves Defendants' Motion to Dismiss Plaintiff's Lanham Act claim on these grounds, it need not address the remaining false advertising factors or parties' arguments.
c. Breach of Contract
Plaintiff TANY alleges that Defendant Roup breached her employment contract with Plaintiff TANY. FAC ¶ 65. To plead a cause of action for breach of contract, a plaintiff must show (1) the existence of a contract; (2) plaintiff's performance or excuse for nonperformance; (3) defendant's breach; and (4) that plaintiff sustained damages resulting from the breach. See Zamora v. Solar, No. 2:16-CV-01260-ODW-KS, 2016 WL 3512439, at *3 (C.D. Cal. June 27, 2016) (citing CDF Firefighters v. Maldonado, 70 Cal.Rptr.3d 667, 680 (2008)).
Plaintiff TANY has sufficiently alleged a breach of contract claim. Plaintiff TANY states that it entered into and performed its obligations under a “Trainer Agreement” with Defendant Roup. FAC ¶¶ 3, 29, 65-66. The Trainer Agreement prohibited trainers, including Defendant Roup, from “using or disclosing company ‘Confidential Information,' which includes its nonpublic business and operational information, training materials and manuals, and the transcribed methods taught to trainers, including those comprising the TA Method's proprietary choreography movements, sequences, and routines” during and after their employment with Plaintiff TANY. Id. ¶ 3, 29.
Next, Plaintiff TANY contends Defendant Roup breached the Trainer Agreement by “using and disclosing to [third parties] the Confidential Information after the termination of her employment [with Plaintiff] TANY.” Id. ¶ 68. Specifically, Plaintiff TANY asserts that Defendant Roup (1) used the Confidential Information “with developing the TSS Method and with planning, recording, and publishing videos on the TSS app and website”; (2) used the Confidential Information “related to customers, operations, program structure, customer intake methods, and employees”; and (3) “disclosed the Confidential Information to third parties, including employees, affiliates, and/or customers of TSS.” Id. Finally, Plaintiff TANY contends that as a result of Defendant Roup's alleged breach, Plaintiff TANY “has suffered, and will continue to suffer, substantial monetary damages in an amount to be determined at trial.” Id. ¶ 69. Thus, Plaintiff TANY has alleged a plausible breach of contract claim. The Court therefore DENIES Defendants' Motion to Dismiss Plaintiffs' breach of contract claim.
d. Violations of California Unfair Competition Law
Plaintiffs argue that Defendants violated California's Unfair Competition Law (“UCL” or “section 17200”) because they engaged in unfair and/or fraudulent business acts and practices including: (1) taking, using, and continuing to use Plaintiffs' confidential information to form and operate TSS, which competes with Plaintiffs, and (2) making false and/or misleading descriptions or representations of fact by setting forth the statements addressed in Plaintiffs' false advertisement claim. FAC ¶ 71.
California's UCL prohibits “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” Cal. Bus. & Prof. Code § 17200. Each UCL prong unlawful, unfair, and fraudulent provides a separate and distinct theory of liability. Lozano v. AT&T Wireless Servs., Inc., 504 F.3d 718, 731 (9th Cir. 2007).
Since Plaintiffs alleged Defendants participated in “unfair and/or fraudulent business acts,” they are required to plead their claims under the unfair and fraud prongs of the UCL. See Lozano, 504 F.3d at 731.
i. “Unfair” Prong
The “unfair” prong of the UCL prohibits a business practice that “violates established public policy or . . . is immoral, unethical, oppressive or unscrupulous and causes injury to consumers which outweighs its benefits.” McKell v. Wash. Mut., Inc., 49 Cal.Rptr.3d 227, 240 (2006). The California Supreme Court has held that “[w]hen a plaintiff who claims to have suffered injury from a direct competitor's ‘unfair' act or practice invokes section 17200, the word ‘unfair' in that section means conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” Cel-Tech Commc'ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 187 (1999).
Although Plaintiffs allege that Defendants are competitors, Plaintiffs do not argue that Defendants' alleged misconduct threatens an incipient violation of an antitrust law or has effects comparable to a violation of an antitrust law. See generally FAC. Accordingly, Plaintiffs have not sufficiently alleged a plausible claim for relief under the UCL's unfair prong.
ii. “Fraud” Prong
“To state a claim under the ‘fraud' prong of [section] 17200, a plaintiff must allege facts showing that members of the public are likely to be deceived by the alleged fraudulent business practice.” Antman v. Uber Techs., Inc., No. 3:15-cv-1175-LB, 2015 WL 6123054, at *6 (N.D. Cal. Oct. 19, 2015). “Claims under the fraud prong of the UCL are subject to the particularity requirements of Federal Rule of Civil Procedure 9(b).” In re Anthem, Inc. Data Breach Litig., No. 15-MD-2617-LHK, 2016 WL 3029783, at *34 (N.D. Cal. May 27, 2016); see also Kearns v. Ford Motor Co., 567 F.3d 1120, 1122, 1126-27 (9th Cir. 2009) (“[If] the [UCL] claim is said to be ‘grounded in fraud' . . . the pleading of that claim as a whole must satisfy the particularity requirement of Rule 9(b).”). A plaintiff, therefore, must plead the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what that person obtained thereby. See Fed.R.Civ.P. 9(b).
To have standing under the UCL's fraud prong, a claim must plead “actual reliance by the [party] seeking relief under [the statute].” Morgan v. AT&T Wireless Servs., Inc., 177 Cal.App.4th 1235, 1235 (2009). No California state court has addressed whether “competitor plaintiffs must plead their own reliance or whether pleading consumer reliance is sufficient for fraudulent business practice claims brought by competitors.” 23andMe, Inc. v. Ancestry.com DNA, LLC, 356 F.Supp.3d 889, 911 (N.D. Cal. 2018). As a result, there is a split of authority in the California district courts with a majority view that a plaintiff must allege its own reliance and not the reliance of third parties. Id.; see also ConsumerDirect, Inc. v. Pentius, LLC, No. 821CV01968JVSADSX, 2022 WL 16949657 at *8 (C.D. Cal. Aug. 25, 2022) (adopting the majority approach that a plaintiff must allege its own reliance). But see Jerome's Furniture Warehouse v. Ashley Furniture Indus., Inc., No. 20CV1765-GPC(BGS), 2021 WL 1541649 at *7-8 (S.D. Cal. Apr. 20, 2021) (adopting the minority approach based on some courts' perception that the “broad, sweeping language” of the UCL indicates California legislative intent that the substantive reach of UCL claims be “expansive”) (internal quotations and citations omitted).
Plaintiffs fail to plead with specificity that they actually relied upon Defendant Roup's alleged misrepresentations. Therefore, Plaintiffs fail to state a UCL claim under the fraud prong.
Since Plaintiffs have not sufficiently alleged a UCL claim under either relevant prong, the Court GRANTS Defendants' Motion to Dismiss Plaintiffs' UCL claim.
e. Leave to Amend
“Where a motion to dismiss is granted, a district court must decide whether to grant leave to amend.” Winebarger v. Pennsylvania Higher Educ. Assistance Agency, 411 F.Supp.3d 1070, 1082 (C.D. Cal. 2019). “The court should give leave [to amend] freely when justice so requires.” Fed.R.Civ.P. 15(a)(2). In the Ninth Circuit, “Rule 15's policy of favoring amendments to pleadings should be applied with ‘extreme liberality.'” United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981). Against this extremely liberal standard, the Court may consider “the presence of any of four factors: bad faith, undue delay, prejudice to the opposing party, and/or futility.” Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001).
Here, leave to amend Plaintiffs' claims should be granted because Plaintiffs can cure their Complaint by pleading additional facts that support their claims. There is no evidence of bad faith or undue delay by Plaintiff, or potential prejudice to Defendant by allowing amendment. The Court therefore GRANTS Defendants' Motion to Dismiss Plaintiff's Lanham Act and UCL claims with leave to amend.
2. Motion to Strike
Defendants move to strike the portion of Plaintiffs' UCL claim asserting that Defendants engaged in unfair and/or fraudulent business acts and practices by making false or misleading statements in advertising. See Mot. 23:1-24:21; White v. Lieberman, 103 Cal.App.4th 210, 220 (2002) (holding that the trial court erred as a matter of law when it denied the defendant's anti-SLAPP motion to strike as moot because it granted the defendant's demurrer on the same claim); Thornbrough v. West Placer Unified Sch. Dist., 2010 WL 2179917, at *11 (E.D. Cal. May 27, 2010) (“Since a defendant who prevails on an anti-SLAPP motion is entitled to recover mandatory attorney's fees, the dismissal of Plaintiff's claims against [defendant] does not moot [defendant's] anti-SLAPP motion.”).
As described, a court considering whether claims are barred by the “anti-SLAPP statute must engage in a two-part inquiry.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1110 (9th Cir. 2003). “First, a defendant must make an initial prima facie showing that the plaintiff's suit arises from an act in furtherance of the defendant's right of petition or free speech.” Id. (internal quotation marks omitted). Under the anti-SLAPP statute, free speech includes “‘any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest,' and ‘any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.'” Id. Generally, if a defendant makes an initial prima facie showing, “the burden shifts to the plaintiff to demonstrate a probability of prevailing on the challenged claims.” Id. But “when an anti-SLAPP motion to strike challenges only the legal sufficiency of a claim,” as here, a court considers instead “whether a claim is properly stated.” Planned Parenthood Fed'n of Am., Inc. v. Ctr. for Med. Progress, 890 F.3d 828, 834 (9th Cir.), amended, 897 F.3d 1224 (9th Cir. 2018); see also Day v. California Lutheran Univ., No. 821CV01286JLSDFM, 2022 WL 17037433 at *12 (C.D. Cal. Aug. 30, 2022) (assessing whether defendants made a prima facie showing that the activities at issue in their anti-SLAPP motion were protected conduct).
As to the first part of the anti-SLAPP inquiry, the Court finds that the Defendants have sufficiently made a prima facie showing that the activities at issue are protected conduct. Defendants pled that the challenged written statements are publicly available on a website, and that they regard an issue of public interest because of Defendant Roup's public persona. Mot. 23:1-24:21.
The California appellate courts have developed multiple tests to determine whether a defendant's activity is in connection with a public issue. Hilton v. Hallmark Cards, 599 F.3d 894 906 (9th Cir. 2010). Relevant here is the Rivero test, where the Court of Appeal for the First District of California surveyed the appellate cases and established three categories of public issues: (1) statements “concern[ing] a person or entity in the public eye”; (2) “conduct that could directly affect a large number of people beyond the direct participants”; (3) “or a topic of widespread, public interest.” Rivero v. American Federation of State, County, & Municipal Employees, 130 Cal.Rptr. 2D 81, 89-90 (2003). Here, Defendants have adequately pled that Defendant Roup is person or entity in the public eye by stating that she is a “celebrity fitness trainer and influencer” with a substantial number of customers and a significant social media following. Mot. 23:21-24:5. Further, Defendants contend that Defendant Roup's statements are biographical, and therefore Defendants have shown that the statements concern a person or entity in the public eye. Id. 24:6-10.
As to the second part of the analysis, Defendants argue that “Plaintiffs cannot carry their burden to show a likelihood of prevailing on the portion of their UCL claim” based on Defendant Roup's biographical statements. Id. 24:12-16. And the Court has already established that Plaintiffs have not pled a plausible UCL claim. But “granting a defendant's anti-SLAPP motion to strike a plaintiff's [] complaint without granting the plaintiff leave to amend would directly collide with Fed.R.Civ.P. 15(a)'s policy favoring liberal amendment.” Verizon Delaware, Inc. v. Covad Commc'ns Co., 377 F.3d 1081, 1091 (9th Cir. 2004); see also Day, 2022 WL 17037433 at *12 (granting plaintiffs' leave to amend their first amended complaint despite defendants' anti-SLAPP motion).
The purpose of the anti-SLAPP statute would still be served if Plaintiffs eliminate meritless claims or plead them adequately. See id. If, after amendment, the Complaint still contains legally insufficient claims, Defendants continue to have anti-SLAPP remedies available to them. See Day, 2022 WL 17037433 at *12 (declining to rule on defendants' anti-SLAPP motion since the court dismissed plaintiffs' claims with leave to amend and defendants could reassert the motion once plaintiffs filed an amended complaint). Accordingly, the Court will defer its final ruling on Defendants' anti-SLAPP request until after Plaintiffs have amended their complaint in light of this Order.
III. CONCLUSION
Based on the foregoing, the Court GRANTS Defendants' Motion to Dismiss Plaintiffs' Lanham Act and UCL claims with leave to amend and DENIES Defendant's Motion to Dismiss Plaintiffs' copyright and breach of contract claims.
IT IS SO ORDERED.