Opinion
CIV. NO. 2:16-201 WBS DB
09-23-2016
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 FOR PRELIMINARY INJUNCTION
Plaintiffs the National Grange of the Order of Patrons of Husbandry and the California State Grange (collectively "plaintiffs") brought this action, the most recent in a series of actions, against defendants the California Guild and Robert McFarland (collectively "defendants") for, inter alia, false advertisement and unfair competition under the Lanham Act, 15 U.S.C. § 1125(a). Presently before the court is plaintiffs' motion for preliminary injunction. (Pls.' Mem. at 1-2 (Docket No. 76-1).)
A central issue in this case 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. (First Am. Compl. ("FAC") ¶ 15 (Docket No. 75).) The organization 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 collected dues from local granges across California and turned over a portion of those dues to the National Grange. (Id.) On October 7, 1946, the California State Grange registered as a corporation with the California Secretary of State. (Decl. of Betsy Huber Ex. 8, California State Grange Corporate Registry (Docket No. 54-6).) The California State Grange elected McFarland as its leader in 2009. (FAC ¶ 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. (Id.; Pls.' Mem. at 4.) Members of the disaffiliated chapter, led by McFarland, continued 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 and unfair competition 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 and unfair competition claims. (Nat'l Grange of the Order of Patrons of Husbandry v. Cal. State Grange, 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 "Granger," "CSG," and "CG" because the National Grange did not expressly seek such relief in its Grange I complaint. (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 those rulings to the Ninth Circuit, where they are 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. April. 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. April. 20, 2016).)
On April 20, 2016, this court found the disaffiliated entity in "deliberate and willful" violation of its permanent injunction on usage of the term "Grange" and granted the National Grange's motion for post-judgment injunctive relief ("April 20 Order"). (Id. at 2, 34.) The court ordered that the disaffiliated entity and "its agents, affiliates, assigns, and any party acting in concert with [it] or its agents, affiliates, and assigns":
[R]emove the word "Grange" from all corporate registrations and other documents filed with any federal, state, or local government, including, but not limited to, articles of incorporation and lobbying licenses on file with the California Secretary of State and all fictitious business name registrations with the County of Sacramento . . .
[R]emove the word "Grange" from all public telephone and business directory listings, on the internet or otherwise, including, but not limited to, online business directory listings on www.Google.com and www.ZoomInfo.com, to the extent they can do so . . .
[Refrain] from: (a) conducting business using the name "Grange," including, but not limited to, soliciting dues using the name "Grange," collecting checks addressed to any entity whose name contains the word "Grange," endorsing checks using any name containing the word "Grange," using bank accounts or other financial accounts under any name containing the word "Grange," and endorsing, signing, or executing any document, lease, instruction, or financial instrument using any name containing the word "Grange"; (b) using "Grange" in any domain name or email address or otherwise representing their domain name or email address as containing the word "Grange"; and (c) referencing their past affiliation with plaintiff or any other entity whose name contains the word "Grange," including representing themselves to be the former California State Grange; successor to the California State Grange; or formerly known as, trading as, or doing business as the California State Grange . . . .(Id. at 37-38.) After the April 20 Order, the disaffiliated entity changed its corporate name to the "California Guild." (Pls.' Mem. at 6.) Since that time, however, 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).)
Defendants submitted an ex parte motion challenging the validity of representations made in an email attached to the Komski declaration. (See Defs.' Ex Parte Appl. (Docket No. 87).) The email recounted a conversation that allegedly took place between the author of the email and a member of the California Guild. (See Komski Decl. Ex. 6.) Defendants allege that the conversation never took place and ask the court to strike the entire declaration based on that email. (Defs.' Ex Parte Appl. at 5-6.) The court did not rely on that email in deciding plaintiffs' preliminary injunction motion. Moreover, plaintiffs have provided evidence that the author of the email was referencing a different person and defendants simply misread the email. (See Pls.' Opp'n, Decl. of Yvette Adams (Docket No. 89-1).) Accordingly, the court will not strike the Komski declaration on that basis.
Simultaneous to litigation in this court was 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" ("August 18 Order"). (FAC Ex. 1 at 33 ("Aug. 18 Order") (Docket No. 75-1).)
On February 1, 2016, plaintiffs brought the present action against defendants for, inter alia, false advertisement under the Lanham Act. (FAC at 38-40.) Plaintiffs allege that since Grange I, defendants have continued to take credit for the California State Grange's history and achievements, spread false rumors about adverse tax consequences associated with Grange membership, misappropriate Grange assets, and misrepresent themselves as successors to the California State Grange. (See Pls.' Mem. at 2.)
Plaintiffs also seek damages for false advertising, trade libel, intentional interference with contractual relations, trespass, and conversion under California law, and false designation of origin, trademark infringement, copyright infringement, and unregistered logo and trade dress infringement under federal law. (FAC at 40-51.) Because plaintiffs "respectfully defer[]" consideration of these claims, (Pls.' Mot. at 11), the court will not consider them for purposes of this motion.
Plaintiffs seek a long list of injunctive relief. From a broad level, that list includes: (1) prohibiting defendants from "referencing the history and goodwill of the California State Grange"; (2) prohibiting defendants from telling local granges that they must disaffiliate with the California Guild to "join" the California State Grange and will suffer adverse tax consequences for doing so; (3) prohibiting defendants from performing public and private functions of the California State Grange; (4) ordering that defendants "deliver up business records, mailing lists, and proprietary data of the California State Grange . . . as well as all documents . . . bearing the name 'Grange'"; (5) ordering that defendants return all Grange tangible property; (6) restraining defendants from misappropriating California State Grange funds; (7) ordering defendants to vacate Grange headquarters and properties and disconnect all telephone numbers formerly registered to the California State Grange; (8) prohibiting defendants from representing themselves as successors to the California State Grange; and (9) ordering that defendants use a disclaimer on all public materials stating "NOT AFFILIATED WITH THE CALIFORNIA STATE GRANGE." (Id. at 3; Pls.' Proposed Order at 1-5 (Docket No. 76-3).)
II. Legal Standard
In order to obtain a preliminary injunction, the moving party "must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 21 (2008); Humane Soc. of the U.S. v. Gutierrez, 558 F.3d 896, 896 (9th Cir. 2009). Injunctive relief is "an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion." Mazurek v. Armstrong, 520 U.S. 968, 972 (1997); see also Winter, 555 U.S. at 22, 24.
"Injunctive relief is the remedy of choice for trademark and unfair competition cases, since there is no adequate remedy at law for the injury caused by a defendant's continuing infringement." Century 21 Real Estate Corp. v. Sandlin, 846 F.2d 1175, 1180 (9th Cir. 1988). The Lanham Act authorizes the court "to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable . . . ." 15. U.S.C. § 1116(a).
III. Analysis
To succeed in a false advertisement claim under the Lanham Act, a plaintiff must prove:
(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).
Lanham Act section 43(a)(1)--the false advertisement statute--states:
Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which--(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act."15 U.S.C. § 1125. Defendants challenge whether plaintiffs have shown that defendants engaged in "commercial advertisement about its own or another's product" as required under Southland Sod Farms. (Def's Opp'n at 6.) Southland Sod Farms is merely a paraphrase of Lanham Act section 43(a)(1), which, in its own terms, encompasses "false designation of origin, false or misleading description of fact, or false or misleading representation of fact." 15 U.S.C. § 1125. These terms encompass defendants' alleged conduct.
Additionally, plaintiffs have satisfied section 43(a)'s "interstate commerce" requirement, as defendants' alleged conduct, if true, tends to diminish the California State Grange's brand, which, in turn, diminishes the National Grange's brand. See Thompson Tank & Mfg. Co. v. Thompson, 693 F.2d 991, 992-93 (9th Cir. 1982) (holding that where defendant's activities affected intrastate commerce which, in turn, affected interstate commerce, Lanham Act's "interstate commerce" requirement is satisfied).
The crux of plaintiffs and defendants' present dispute is whether defendants' post-Grange I conduct constitutes false advertisement. "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." Id. "When evaluating whether an advertising claim is literally false, the claim must always be analyzed in its full context." Id.
A. References to the History and Goodwill of the California State Grange
Plaintiffs allege that defendants continue to refer to themselves as "the same organization that has existed for 'decades'" in violation of the Lanham Act. (See Pls.' Mem. at 9 ("Defendants have also continued to advertise that 'cities and townships have grown up around our rural halls'; that the the [sic] Defendant's organization has 'lobbyists in Sacramento and boasts a long history of successful legislative advocacy'; that the Defendants' organization was the first organization to support and promote women as equal voting members' [sic]; and that '[i]n 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 .'" (citing Komski Decl. Ex. 2, CSG Website Screenshots)).) They argue that "only the California State Grange can claim the 140 years' [sic] of history and goodwill associated with the organization" and that "Defendant the California Guild recounts plaintiff's history, and not its own." (Id. (internal quotation marks and citation omitted).)
Plaintiffs are already protected by an injunction prohibiting defendants from "referencing their past affiliation with [the National Grange] or any other entity whose name contains the word 'Grange,' including representing themselves to be the former California State Grange; successor to the California State Grange; or formerly known as, trading as, or doing business as the California State Grange." (Apr. 20 Order at 38.) It appears, however, that defendants have found a way around that prohibition by taking credit for the California State Grange's history and achievements without referencing it by name.
The Lanham Act prohibits uncredited references to another entity's history and achievements. 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 constitutes false advertising); Riggs Inv. Mgmt. Corp. v. Columbia Partners, L.L.C., 966 F. Supp. 1250, 1267 (D.D.C. 1997) (investment company formed by former chairman of investment firm made false advertisements when it represented itself as being responsible for investment firm's investment record without giving proper attribution).
But defendants have found a loophole around that too: because the California Guild remains incorporated under the same corporate papers that the California State Grange formerly existed under, (see Pls.' Mem. at 3 (referencing "the 1946 corporation previously named the 'California State Grange,' now named the 'California Guild,' Entity No. C0210454"), defendants are technically correct when they refer to the California Guild as an organization that has existed for "decades" and around which "cities and townships have grown up."
Plaintiffs argue and provide testimony that such statements nevertheless mislead the public as to constitute false advertisement. (See id. at 12.) The problem with that argument is under defendants' loophole, they have not misled the public: their organization has existed for "decades" according to the corporate papers filed in 1946, and the corporate entity in those papers is the entity around which "cities and townships have grown up." While the court recognizes that defendants' claims to history and achievements accrued prior to 1946 are undeniably false, its hands are tied with respect to claims to history and achievements accrued post-incorporation. The court cannot, under the Lanham Act's false advertisement statute, bar defendants from telling the public something that is neither false nor misleading. See 15 U.S.C. § 1125(a)(1) (requiring "false designation of origin, false or misleading description of fact, or false or misleading representation of fact").
What guides the court's decision here is not ignorance of reality or lack of ability to spot unfair play. Defendants have found a way to piggyback off the California State Grange's decades of achievements because, for some reason, plaintiffs have not taken effective action in the three years after the parties disaffiliated to prevent defendants from occupying the California State Grange's corporate charter. The court cannot step in to save plaintiffs here.
Because plaintiffs have not shown likelihood of success on the merits with respect to defendants' references to the California State Grange's post-1946 history and achievements, the court cannot extend plaintiffs the full measure of relief they seek. The court is limited to enjoining defendants from referencing history and achievements accrued by the California State Grange prior to its incorporation.
With respect to such relief, plaintiffs have shown likelihood of irreparable injury, as further uncredited references to their history may permanently dilute their brand in California. (See Pls.' Reply at 10 ("[For] individuals, families and communities, regardless of their position in the present dispute, the California State Grange is understood as a network of fraternal relationships that extend back for generations . . . with personal friendships and a common belief in service to their community. For these members of the relevant public, the categorical goodwill and common spirit driving the California State Grange was not a mere attribute of the goods and services offered by Plaintiffs, but was the sine quan non of Plaintiffs' identity and reputation.") (Docket No. 83)); see also Century 21, 846 F.2d at 1180 ("[T]here is no adequate remedy at law for the injury caused by a defendant's continuing infringement [in trademark and unfair competition cases].").
The balance of equities favors plaintiffs, as defendants "cannot complain of the harm that will befall [them] when properly forced to desist from [their] infringing activities." Triad Sys. Corp. v. Se. Express Co., 64 F.3d 1330, 1338 (9th Cir. 1995). The public has an interest in being able to distinguish between the two entities.
B. Interactions with Local Granges
Plaintiffs allege that defendants "continue to throttle the California Granges into becoming members of Defendant California Guild by falsely claiming that they must 'disaffiliate' with the California Guild in order to join [the California State Grange]." (Pls.' Mem. at 10.) They also claim that defendants "dispense false claims regarding the taxation of California Grange, claiming that the local chapters are 'no longer nonprofit, must pay taxes, cannot accept tax deductible donations, or receive various grants.'" (Id.) Defendants respond that they are entitled to make such statements because the statements "may be true." (Defs.' Opp'n at 13 (Docket No. 79).)
Plaintiffs have not proven that the statements are false. They carry the burden of persuasion on a motion for preliminary injunction. See Mazurek, 520 U.S. at 972. Accordingly, the court will deny plaintiffs' request to enjoin defendants from making such statements.
C. Performance of Grange Functions
Plaintiffs request that the court enjoin defendants from "exercising functions within the exclusive authority of the California State Grange such as the collection of Grange dues; disposition of assets formerly or currently owned by the California State Grange, writing and cashing checks on the account of the California State Grange; reorganization of local [granges]; induction of new Grange members and installation of Grange officers; [and] performance of Grange rituals." (Pls.' Proposed Order at 3.) The court will address disposition of Grange assets in Parts D through F of this section.
The April 20 Order already bars defendants from "soliciting dues using the name 'Grange'" and "collecting checks addressed to any entity whose name contains the word 'Grange.'" (Apr. 20 Order at 37-38.) As such, plaintiffs fail to prove likelihood of irreparable harm with respect to collection of Grange dues, as relief is already available to them pursuant to the April 20 Order.
Defendants argue that plaintiffs' Grange II claims "are barred under the doctrines of res judicata or collateral estoppel." (Defs.' Opp'n at 6.) While it is true that such claims may be barred to the extent they arise out of the same transaction or occurrence as those in Grange I, plaintiffs' allegations in the present case concern activities that occurred subsequent to the commencement of Grange I. (See, e.g., Pls.' Reply at 3 (citing defendants' July 30, 2016 email in which defendants claim "[t]he California Guild is the same organization . . . for decades").) In light of these differences, res judicata and collateral estoppel do not apply to the claims raised in this motion. See L.A. Branch NAACP v. L.A. Unified Sch. Dist., 750 F.2d 731, 739 (9th Cir. 1984) ("Plaintiffs may bring events occurring after the filing of the complaint into the scope of the litigation by filing a supplemental complaint . . . but there is no requirement that plaintiffs do so.").
With respect to reorganization of local granges and induction of new Grange members and officers, to the extent defendants engaged in such activities while purporting to act in the official capacity of the California State Grange, such activities would be in violation of the April 20 Order. (See id. (prohibiting defendants from "conducting business using the name 'Grange'" or "representing themselves to be the former California State Grange [or] successor to the California State Grange").) To the extent defendants were merely soliciting new guild members and officers in their own capacity, such acts do not constitute false advertisement. As the April 20 Order offers plaintiffs relief for acts defendants may have performed in Grange capacity, no further injunction with respect to such activities is necessary.
With respect to "performance of Grange rituals," the court finds plaintiffs' request to be vague and overly broad and, therefore, unenforceable. See Califano v. Yamasaki, 442 U.S. 682, 706 (1979) (holding that "injunctive relief should be no more burdensome to the defendant than necessary to provide complete relief to the plaintiffs"); Connecticut Gen. Life Ins. Co. v. New Images of Beverly Hills, 321 F.3d 878, 883 (9th Cir. 2003) (defendant may seek modification of preliminary injunction because injunction was "vague and ambiguous"); Lamb-Weston, Inc. v. McCain Foods, Ltd., 941 F.2d 970, 974 (9th Cir. 1991) ("Injunctive relief . . . must be tailored to remedy the specific harm alleged.").
While performance of similar functions can contribute to a violation of the Lanham Act, see, e.g., Herb Reed Enterprises, Inc. v. Monroe Powell's Platters, LLC, 25 F. Supp. 3d 1316, 1325 (D. Nev. 2014) (finding trademark infringement where one music group "market[ed] similar live vocal performances" as another), plaintiffs' request encompasses legitimate commercial activities such as soliciting new members and providing services to farm communities. Accordingly, the court will deny plaintiffs' request to enjoin defendants' "performance of Grange rituals."
D. Intellectual Property
Plaintiffs seek to have defendants "deliver up all business records, mailing lists, and proprietary data of the California State Grange." (Pls.' Mem. at 3.) They allege that defendants are using such records, lists, and data to falsely advertise themselves to the public as being affiliated with the California State Grange. (See id. at 2.) While plaintiffs may be entitled to such records, data, and items as a proprietary matter, the sole matter being considered in this motion is whether defendants are using the property to commit false advertisement.
Plaintiffs' proprietary claims appear more suitably considered under the doctrines of trespass and conversion, which they have alleged in their Complaint, (see FAC at 50-51).
With respect to business records and mail lists, plaintiffs have not provided evidence that defendants' alleged use of such records and lists constitutes false advertisement. The most discrete act plaintiffs allege defendants have taken with respect to such records and lists is "us[ing] the proprietary mailing lists of the California State Grange . . . albeit under different names" to--presumably--contact Grange members. (Id.) Contacting Grange members with proper identification is not, in itself, false advertisement. See Southland Sod Farms, 108 F.3d at 1139 (requiring a "literally false," "mislead[ing]," or "confus[ing]" statement for a false advertisement finding).
With respect to proprietary data, plaintiffs have provided evidence that defendants are using website logos, images, and backgrounds that are nearly identical to plaintiffs' to cause confusion to the public. (See Komski Decl. at 8-12 (comparing screenshots of defendants' and plaintiffs' websites).) Such use may constitute violation of Lanham Act section 43(a)(1). See GoTo.com , Inc. v. Walt Disney Co., 202 F.3d 1199, 1206 (9th Cir. 2000) (finding likelihood of success on trademark infringement claim where defendant used "glaringly similar" logo as plaintiff's); CJ Prod. LLC v. Snuggly Plushez LLC, 809 F. Supp. 2d 127, 161 (E.D.N.Y. 2011) (holding that plaintiff established likelihood of success on trademark infringement claim where defendant's website "looks substantially similar to the plaintiffs' website"); Gmes, LLC v. Line of Sight Commc'ns, Inc., No. 2:16-CV-04085-NKL, 2016 WL 3566254, at *5 (W.D. Mo. June 27, 2016) (finding plaintiff sufficiently pled unfair competition where defendant "revised its website to look substantially similar" to plaintiff's).
However, plaintiffs' request, as phrased in their proposed order, is overly broad. It encompasses far more than the website images they allege defendants are using to confuse the public. Under their proposed order, plaintiffs would be entitled to data for which they have not shown defendants' use in false advertising schemes. Such overbreadth is grounds for denial. See Califano, 442 U.S. at 706; Lamb-Weston, 941 F.2d at 974. Accordingly, the court will not grant plaintiffs' request for return of intellectual property at this time.
E. Tangible Property
Plaintiffs seek return of "any Grange regalia[,] paraphernalia," "tangible things bearing the name 'Grange,'" "equipment, fixtures," and "other real and personal property." (Pls.' Proposed Order at 3-4.) They allege that defendants are "performing Grange rituals and using Grange paraphernalia in such rituals, and, in general, functioning as a Grange." (Decl. of Betsy Huber at 8.) As discussed above, while plaintiffs may be entitled to such property as a proprietary matter, the sole matter being considered here is whether defendants are using the items to commit false advertisement.
To the extent defendants are confusing the public by "performing Grange rituals . . . using Grange paraphernalia," plaintiffs already have an avenue of relief via the April 20 order, which bars defendants from "conducting business using the name 'Grange'" or "representing themselves to be the former California State Grange [or] successor to the California State Grange." (April 20 Order at 37-38.) Accordingly, the court will not grant plaintiffs' request for return of tangible property at this time.
F. Alleged Misappropriation of Grange Funds
Plaintiffs request that the court "restrain[] Defendants from further misappropriation and dissipation of assets and accounts held in the name of the California State Grange, the California Guild, or the 1946 [corporation]." (Pls.' Mem. at 3.) They allege that defendants continue to engage in schemes--sometimes with the aid of local granges--to misappropriate their assets. (Id. at 10.)
The April 20 Order bars defendants and their "agents, affiliates, assigns, and any party acting in concert with [them]" from "using bank accounts or other financial accounts under any name containing the word 'Grange'" or "endorsing, signing, or executing any document, lease, instruction, or financial instrument using any name containing the word 'Grange.'" (Apr. 20 Order at 37-38.) That provision provides plaintiffs the protection they seek. Beyond that, plaintiffs have not proven that freezing defendants' assets is necessary to prevent unavailability of relief following final judgment in this case. Accordingly, the court will deny plaintiffs' request with respect to defendants' alleged misappropriation of Grange funds.
G. Grange Buildings and Former Telephone Numbers
Plaintiffs ask the court to evict defendants from the buildings alleged to belong to the California State Grange and require defendants to disconnect all telephones numbers formerly registered to the California State Grange. (Pls. Mem. at 3.) Given defendants' deceptive tactics throughout these and previous proceedings, (see, e.g., Defs.' Reply to Pls.' Opp'n to Defs.' Mot. to Dismiss at 1 (referring to selves as organization "created in 1873," "provid[ing] 160 years of service," and "oldest agricultural organization in California") (Docket No. 40)), their use of plaintiffs' buildings and former telephone numbers would serve to further create a false impression among the public that they are affiliated with or successors to the California State Grange. Cf. Delaware Valley Fin. Grp., Inc. v. Principal Life Ins. Co., 640 F. Supp. 2d 603, 614 (E.D. Pa. 2009) (considering defendants' use of "same offices" and "same telephone numbers" in deciding Lanham Act unfair competition claim). As explained in Part A of this section, such impression irreparably harms plaintiffs and the balance of equities and public interest favor plaintiffs.
That being said, requiring defendants to vacate the office buildings they presently occupy constitutes a drastic measure at the preliminary injunction stage. Such measures are disfavored. See Anderson v. United States, 612 F.2d 1112, 1114 (9th Cir. 1979) ("Mandatory preliminary relief, which goes well beyond simply maintaining the status quo . . . is particularly disfavored . . . ."). As such, the court will settle at this stage for the more measured solution of requiring defendants to display a disclaimer. That measure is discussed below in Part I.
Requiring defendants to cease using plaintiffs' old telephone numbers, on the other hand, is reasonable. Accordingly, the court will grant that request, subject to the terms stated in the conclusion of this Order.
H. Other Alleged Misrepresentations
As a final catchall, plaintiffs ask the court to prohibit defendants from "misrepresenting that they are the successors to the California State Grange, or the authorized representatives of the California Granges, or of the 1946 corporation." (Pls.' Mem. at 3.) They seek a declaration that plaintiffs are "the exclusive authorized representatives of the California Granges[,] . . . the exclusive authorized representatives of the 1946 corporation[, and] . . . the exclusive owner of all assets and accounts held, registered or recorded in the name of the California State Grange and/or California Guild." (Pls.' Proposed Order at 2.)
The April 20 Order already prohibits defendants from "representing themselves to be the former California State Grange; successor to the California State Grange; or formerly known as, trading as, or doing business as the California State Grange." (Apr. 20 Order at 38.) That provision covers any claim defendants may make that they are "authorized representatives of the California Granges." The court declines to extend these prohibitions to include defendants' references to their corporate registration.
As for plaintiffs' proposed declaration, such relief is not required to prevent harm to plaintiffs in light of the relief they are already entitled to under this Order, the April 20 Order, and the August 18 Order. Accordingly, the court will deny that request.
I. Use of a Disclaimer
Finally, plaintiffs request that the court order defendants to "commence use of a prominent disclaimer in all business, commercial, official and public communications, for a period of time extending until two years following a final order in this case or such other such time as may be judged appropriate by the Court, stating: NOT AFFILIATED WITH THE CALIFORNIA STATE GRANGE." (Pls.' Proposed Order at 5.)
While such orders are not always necessary, they are well within the discretion of the court. See Consumers Union of U.S., Inc. v. Gen. Signal Corp., 724 F.2d 1044, 1053 (2d Cir. 1983) ("Disclaimers are a favored way of alleviating consumer confusion as to source or sponsorship. Absolute prohibitions of speech as provided for in the instant preliminary injunction are improper where there is any possibility that an explanation or disclaimer will suffice." (internal citations omitted)); see also Mattel, Inc. v. MCA Records, Inc., 28 F. Supp. 2d 1120, 1143 (C.D. Cal. 1998) (citing Consumers Union favorably), aff'd, 296 F.3d 894 (9th Cir. 2002); Playboy Enters., Inc. v. Welles, 7 F. Supp. 2d 1098, 1104 (S.D. Cal.) (citing Consumers Union favorably), aff'd, 162 F.3d 1169 (9th Cir. 1998).
Here, because the court has not precluded defendants from claiming credit for the history and achievements of the corporate entity formerly named the California State Grange from 1946 to 2013, unless the public is notified that defendants are not in fact the California State Grange there would be a strong probability of confusion. A disclaimer is therefore necessary on any such communication in order to avoid the inference that defendant is in fact still the California State Grange.
Accordingly, on all business, commercial, official, and public communications discussing the history or achievements of the corporate entity formerly named the California State Grange the court will require defendants to state or display a prominent disclaimer stating: "NOT AFFILIATED WITH THE CALIFORNIA STATE GRANGE."
Defendants have already used a disclaimer stating they "are not affiliated with . . . the Grange of the State of California's Patrons of Husbandry Chartered." (Komski Decl. at 7-8.) Plaintiffs allege that the "name is unknown to the California Granges." (Id.) The court sees no harm in making the disclaimer clearer. --------
IV. Conclusion
IT IS THEREFORE ORDERED that plaintiffs THE NATIONAL GRANGE and THE CALIFORNIA STATE GRANGE'S motion for preliminary injunction be, and the same hereby is, GRANTED IN PART and DENIED IN PART as follows:
(1) defendants the CALIFORNIA STATE GRANGE d/b/a "California Guild," ROBERT MCFARLAND, and their agents, affiliates, and assigns, and any party acting in concert with them or their agents, affiliates, or assigns, are enjoined from referencing any history or goodwill accrued by the California State Grange prior to October 7, 1946, in any advertising, promotional,
commercial, official, or public communications;Dated: September 23, 2016
(2) within seven (7) days from the date of this Order, defendants shall cease using all telephone numbers used by defendants that were ever registered to the California State Grange, and refrain from further use of such telephone numbers in any business, commercial, or official communications;
(3) within seven (7) days from the date of this Order, defendants shall, until such time as the court deems proper, commence use of a prominent disclaimer on all business, commercial, official, and public communications discussing the history or achievements of the corporate entity formerly named the California State Grange stating: "NOT AFFILIATED WITH THE CALIFORNIA STATE GRANGE"; and
(4) plaintiffs' remaining requests are DENIED.
/s/_________
WILLIAM B. SHUBB
UNITED STATES DISTRICT JUDGE