Opinion
Civil No. 2:02-CV-0010 PGC.
July 30, 2004
FRED R. SILVESTER (3862), DENNIS J. CONROY (0712), SPENCER SIEBERS (8320), SILVESTER CONROY, L.C., Salt Lake City, Utah, Attorneys for Plaintiff.
PRETRIAL ORDER
This matter having come before the court on July 19, 2004, at a pretrial conference held before the Honorable Paul G. Cassell, pursuant to Fed.R.Civ.P. 16; and Fred Silvester and Spencer Siebers, having appeared as counsel for plaintiff, and Richard Henriksen and Aaron Flater having appeared as counsel for defendants, the following action was taken:
JURISDICTION : This is an action for false advertising, defamation and civil conspiracy. Jurisdiction was determined by the court to be proper under 28 U.S.C. § 1331 and 1332.
VENUE : Venue was determined by the court to be proper pursuant to 28 U.S.C. § 1391.
GENERAL NATURE OF THE CLAIMS OF THE PARTIES :
Plaintiff claims defendants are guilty of engaging in a civil conspiracy to defame plaintiff and engage in unfair trade practices in violation of the Lanham Act, 15 U.S.C. § 1125(a). Defendants compete with plaintiff in providing information concerning specialty schools and behavior modification programs to parents of troubled teenagers. Defendants attract interest and traffic to their website by publishing false and defamatory information on the internet and to parents investigating plaintiff's member schools. Defendants then falsely advertise their own staff, services and programs.
Defendants deny that they engaged in Civil Conspiracy to defame Plaintiff and to engage in unfair trade practices in violation of the Lanham Act. Defendants deny that they attract interest and traffic to their website by publishing false and defamatory information on the internet and to parents investigating Plaintiff's member schools and claim that the information that they have posted is substantially true. Defendants deny that they falsely advertise their own staff, services and programs and claim that their advertising is substantially true. Any statements made by Defendants were based on consistent reliable information from multiple sources. Defendants also deny that the Plaintiff was damaged by any of the alleged claims of the Plaintiff.
UNCONTROVERTED FACTS :
1. Marie Peart is PURE's Admissions Director.
2. Georgia Stanton-Cuevas was PURE's Education and Finance Director.
3. Scheff met with Lorraine Colpitts, director of Safe and Sound Transportation.
4. Scheff reviewed Ms. Colpitts' credentials
5. Scheff posted "A Parent's True Story" on the PURE website.
6. Scheff previously told parents who were contemplating enrolling their children at a World Wide member school of her "True Story" with World Wide.
7. PURE added metadata to its website after June, 2003 to include the tags: WWASP, WWASPS, world wide association of schools, teen help, Tranquility Bay, Academy at Ivy Ridge, Majestic Ranch Academy, Cross Creek Manor, Cross Creek Academy, Casa by the Sea, Academy at Dundee Ranch, Teen Help, Spring Creek Lodge, Carolina Springs Academy.
8. Scheff pays for sponsored listings to direct people surfing the web to PURE's website.
9. PURE advertises a "qualified network" of programs.
10. Donna Headricks did the research on programs included in the "qualified network."
11. Donna Headricks was PURE's "Director of Quality Assurance."
12. Scheff did not receive documentation from Headricks on the programs Headricks approved.
13. Donna Headricks died on July 5, 2002.
14. Scheff began referring students to Red Rock Canyon School in March or April, 2001.
15. Scheff understood the program was "pretty much a new school."
16. Scheff had not visited Red Rock prior to March, 2003.
17. Scheff did not know if any parents had complaints about the school before she referred parents.
18. PURE referred parents to Reality Ranch.
19. PURE received $1,860 for each student enrolled at Oak Ridge Military Academy.
20. Oak Ridge previously accounted for the majority of PURE's income.
21. PURE's next largest referral payor is Sorenson's Ranch.
22. Between August 3, 2001 and November 23, 2003, Oak Ridge paid referral fees to Susan Scheff (PURE, Inc.) in the amount of $197,386.75.
23. Between April 5, 2002 and October 5, 2003, Sorenson's Ranch paid referral fees to PURE-Sue Scheff in the amount of 60,000.00.
24. Between June 6, 2002 and June 3, 2003, High Top Ranch paid referral fees to PURE in the amount of $3,500.00.
25. Between June 21, 2001 and October 23, 2002, Red Rock Canyon School paid referral fees to PURE in the amount of $50,750.00.
26. PURE's website contains a form which parents intersted in more information may fill out and transmit to PURE. These are referred to as parent Intake Forms.
27. In March, 2003, Scheff deleted parent Intake Forms every 30 days.
28. Parent Intake Forms that are printed out are shredded.
29. PURE does not keep records of families it places in PURE programs.
30. On August 7, 2000, Scheff enrolled her daughter at Carolina Springs Academy.
31. "SLS1262@aol.com" was formerly one of Scheff's email addresses.
32. Scheff, at times, posted information from parents who contacted PURE to the Trekkers listserv.
33. Scheff refers parents to Blanche Hardy to share her experience with World Wide.
34. Scheff referred parents to Paula Reeves to discuss matters pertaining to children's programs.
35. Scheff shared information with Paula Reeves on matters pertaining to children's programs.
36. Plaintiff is aware of parents, present and former students of affiliated programs who have complained about aspects of the programs.
37. Most students entering affiliated programs express dissatisfaction with the structured nature of the programs.
38. Plaintiff is aware a few students and a few parents with students in affiliated programs have alleged some student or students were physically abused.
39. Plaintiff is aware a few students and a few parents with students in affiliated programs have alleged some student or students were psychologically or emotionally abused.
40. Parents and/or students with complaints about Plaintiff or its member schools are geographically dispersed.
41. A girl named [V H] died while at Tranquility Bay, a member school of the World Wide Association of Specialty Programs and Schools.
42. Ken Kay was a former director of the Brightway Adolescent Hospital.
43. Brightway Adolescent hospital was a facility where some teens entering various programs received physical, psychological and psychiatric assessments prior to entering programs and that Brightway Adolescent Hospital existed prior to the World Wide Association was run by Utah Alcoholism Foundation under a contract with a program which later affiliated with Plaintiff.
44. Sunrise Beach was closed after an investigation by immigration officials of the Mexican government when it was determined Sunrise's Mexican lawyers failed to obtain the proper approval from immigration officials.
45. Some employees of Sunrise Beach were arrested by the Mexican government.
46. The Morova Academy was a WWASP associated program.
47. The Morova Academy was closed after investigation by the Czechoslovakian government.
48. Some employees of Morova Academy were arrested by the Czechoslovakian government.
49. High Impact was promoted by the websitewww.parentresources.net.
50. RB Billing provided billing services for High Impact.
51. RB Billing provided billing services for WWASP programs.
52. [J J], who had previously been at the WWASP program, Casa by the Sea, was at the High Impact program in Mexico when it closed in December of 2001.
53. [J J] was removed from High Impact and placed at a non-WWASP program named Cedar Mountain Academy in Utah with the assistance of the WWASP director, Ken Kay.
CONTESTED ISSUES OF FACT :
False Advertising:
1. Whether Scheff's advertising was false.
2. Whether Scheff's statements posted on the Woodbury Reports website constitute commercial speech.
3. Whether Scheff's statements were likely to influence purchasing decisions of parents looking for information for programs and schools for teenagers.
4. Whether Scheff's statements were deceptive of a sufficient portion of parents looking for information for programs and schools for teenagers.
5. Damages suffered by plaintiff, or unjust enrichment of defendants, as a result of such advertising.
Defamation:
6. Whether Scheff's publications regarding plaintiff were statements of fact concerning the plaintiff.
7. Whether Scheff's statements were capable of defamatory meaning.
8. Whether Scheff's statements, capable of defamatory meaning, were false.
9. Whether Scheff's statements, if false, were defamatory per se.
10. Whether Scheff published such statements with actual malice.
11. Damages suffered by plaintiff as a result of such defamatory statements.
Civil Conspiracy:
12. Whether there was a combination of two or more persons.
13. Whether there a meeting of the minds on an object to be accomplished or course of action.
14. Whether there was one or more unlawful overt acts carried out with the common purpose of furthering the object to be accomplished or course of action.
15. Whether plaintiff suffered damages proximately caused as a result of those acts.
16. What was the amount, if any, of the damage proximately caused by those acts.
UNCONTESTED ISSUES OF LAW :
The Court makes the following findings, as a matter of law, in regards to plaintiff's claims of False Advertising and Unfair Business Practices under the Lanham Act, 15 U.S.C. § 1125:
I. Defendants' statements constitute commercial speech:
A. on the PURE website;
B. in response to parent Intake Forms.
II. Plaintiff is a competitor of defendants likely to be injured by false advertising.
The Court makes the following findings, as a matter of law, in regards to plaintiff's claims of defamation:
III. Plaintiff is a limited purpose public figure.
IV. Plaintiff is required to prove defendants' statements were made with actual malice.EXHIBITS : Exhibits shall be marked and entered in accordance with the court's Pre-Trial Order dated July 16, 2004. Exhibits shall be identified and exchanged in accordance with the court's Order Regarding Motions in Limine dated July 20, 2004.
WITNESSES :
Plaintiff will call:
1. Ken Kay (.75): It is anticipated Mr. Kay will testify concerning the organization of World Wide and member schools; World Wide's contacts and communications with defendant; communications with parents; defendant's enrollment in a World Wide member school; defendant's defamatory statements and false advertising; behavior modification and academic programs of member schools; damages incurred by World Wide as a result of defendant's conduct.
2. Sue Scheff (3.0): It is anticipated Ms. Scheff will testify concerning her personal history and enrollment of her daughter at a World Wide member school; her postings on various websites; her marketing of The PURE Foundation and PURE, Inc.; her communications with "Trekkers," with parents, with members of the press, with government officials; the services, staff and programs of PURE.
3. Karr Farnsworth (.75): It is anticipated Mr. Farnsworth will testify concerning the organization of World Wide and member schools; defendant's defamatory statements and false advertising; behavior modification and academic programs of member schools; damages incurred by World Wide as a result of defendant's conduct.
4. Kevin Richey (.25): It is anticipated Mr. Richey will testify concerning his contacts with defendant; his work experience, including that with Teen Help; the ownership of a referral service; marketing of referral services.
5. Jane Hawley (.5): It is anticipated Ms. Hawley will testify concerning her contacts with parents who have been contacted by defendant or viewed website or other materials; her communications with parents of World Wide member schools; her work experience, including that with Teen Help; Teen Help's referral parent program; the ownership of a referral service; marketing of referral services.
6. Marie Peart (.25): It is anticipated Ms. Peart will testify concerning her relationship with defendant and past work experience.
7. Carey Bock (.4): It is anticipated Ms. Bock will testify concerning her involvement with defendant and the Trekkers listserv.
8. Elaine Davis (.4): It is anticipated Ms. Davis will testify concerning the behavior modification and academic programs at Carolina Springs Academy; defendant's daughter's enrollment at Carolina Springs Academy; licensing and qualifications of staff at Carolina Springs Academy.
9. Jean Foye (.2): It is anticipated Ms. Foye will testify concerning defendants contacts and dealings with Teen Help; damages incurred by plaintiff as a result of defendants' conduct; marketing of member schools; the Teen Help referral system.
10. Plaintiff anticipates reserving at least .5 hours for cross-examination and rebuttal testimony.
Defendant will call:
1. Sue Scheff (1.5) It is anticipated that Sue Scheff will testify concerning any issues raised by Plaintiff's examination, the basis for statements made on the Woodbury Reports, other internet sites, listserve's and private Email; the nature of PURE's services, work and activities performed by PURE employees, contractors, volunteers and others with whom PURE has associated; PURE's income and expenses; communications with parents upon which Sue Scheff relied confirming and verifying reports of abuse at World Wide programs. Any other issues related to Lanham Act, defamation or conspiracy allegations.
2. Bernadette Cabral (.25) It is anticipated that Ms. Cabral will testify concerning what she told Sue Scheff about her knowledge of World Wide and its programs, the death of V.H. at a World Wide program, the treatment and experiences of her daughter in a World Wide program and the after effects of that treatment. Ms. Cabral may testify concerning her relationship with PURE and claims of false advertising. She may also testify regarding the truth of any alleged defamatory statements and to the absence of a conspiracy. Ms. Cabral may testify as to Ms. Scheff's character and reputation for truthfulness.
3. Debbie Saenz (.25) It is anticipated that Ms. Saenz will testify concerning what she told Sue Scheff about her knowledge of World Wide and its programs, the treatment and experiences of her daughter at Carolina Springs a World Wide program and the after effects of that treatment. Ms. Saenz may testify concerning her relationship with PURE and claims of false advertising. She may also testify regarding the truth of any alleged defamatory statements and to the absence of a conspiracy. Ms. Saenz may testify as to Ms. Scheff's character and reputation for truthfulness.
4. Arlene Farrow (.25) It is anticipated that Ms. Farrow will testify regarding her conversations with Sue Scheff discussing her knowledge of World Wide and its programs and the transfer and condition of a boy who arrived at the Cedar Mountain Academy from High Impact and the circumstances surrounding that transfer. Ms. Farrow may provide testimony related to claims of false advertising and defamation.
5. Chris Goodwin (.25) It is anticipated that Mr. Goodwin will discuss what he told Sue Scheff regarding his knowledge of World Wide and its programs; his child's experiences with World Wide programs and High Impact, Mr. Goodwin's own experiences with World Wide programs and High Impact and the after effects of treatment at World Wide. Mr. Goodwin may give testimony regarding any claims of conspiracy, advertising or defamation.
6. John France, Sr. (.25) It is anticipated that Mr. France will testify regarding what he told Sue Scheff about his knowledge of World Wide and its programs; his experience and his son's experience with World Wide programs and that he will also testify regarding what he told Sue Scheff about the after effects of children at World Wide programs. Mr. France may give testimony regarding any claims of conspiracy, advertising or defamation.
7. Donna Watson (.25) It is anticipated that Ms. Watson will testify concerning her communications with Sue Scheff regarding her knowledge of World Wide and its programs the treatment of her child at Carolina Springs Academy and High Impact; her experiences with World Wide programs and High Impact as well as what she told Sue Scheff regarding the after effects of treatment of children at World Wide programs. Ms. Watson may testify regarding any claims of conspiracy, advertising and refuting claims of defamation.
8. Heidi Mock (.25) It is anticipated that Ms. Mock will testify concerning her prior work history and work experience with World Wide programs; her knowledge of World Wide and High Impact and her communications with Sue Scheff about World Wide programs and High Impact. Ms. Mock may testify as to the truth of statements made by Defendants as well as other claims of defamation, advertising and conspiracy.
9. Amberly Knight (.30) It is anticipated that Ms. Knight will discuss her experiences at the Dundee Ranch Academy, her communications and contacts with government officials; the relationship between World Wide and High Impact and her communications with Ms. Scheff regarding World Wide and its programs. Ms. Knight may testify as to the truth of statements made by Defendants as well as other claims of defamation, advertising and conspiracy.
11. Marie Peart (.25) It is anticipated that Ms. Peart will testify regarding her work as an independent contractor for PURE including research and investigation into programs and visits to those programs and any other allegations related to Lanham Act, Defamation and Conspiracy allegations. It is also anticipated that Ms. Peart will testify her communications with Sue Scheff in which she provided information about Robert Litchfield, High Impact and World Wide programs including the closure of these programs.
12. Paula Reeves (.30) It is anticipated that Ms. Reeves will testify about her and her son's experience with World Wide as well as her communications with Sue Scheff regarding her knowledge of World Wide and its programs; the closure of World Wide programs; World Wide's affiliation to High Impact; treatment of children at World Wide programs; and the after effects of treatment of children in World Wide programs. Ms. Reeves may testify as to the truth of statements made by Defendants as well as other claims of defamation, false advertising and conspiracy.
13. Stephen Nicolatus (.50) It is anticipated that Mr. Nicolatus will provide expert testimony regarding Plaintiff's claimed economic impact of Defendants actions and actions, including but not limited to reputation and good will, factors that affect growth, economic impact of Defendants actions, lack of evidence of loss, lack of any financial loss as a result of Defendants actions, growth of Plaintiff's business, increased enrollment profit and sales and any other of the information reviewed, his opinions concerning such as set forth in his written report.
14. James A. Anderson (.50) Dr. Anderson will testify as to the information available concerning the Plaintiff, the impact of mass media information compared to statements made on struggling teens website and help your teens website. Dr. Anderson will also testify concerning the circulation data for programs and articles containing information about the Plaintiff and the damaging impact of information contained in newspapers, stories and articles as well as the fact that information spread on the internet through chat rooms and other forums is not as reliable or credible as information that is published through major media outlets. Dr. Anderson will also testify concerning any other information contained in his written report.
15. Chris Eaves — The Defendants may not call this expert witness depending on what the Plaintiff's introduce into evidence concerning Defendants use of metatags. If called his testimony will be concerning use or metatags and his opinions and intentions set forth in his written report and designation.
Defendants will use the depositions of:
1. Lauren Staudt (.15)
2. Joyce Slocum (.15)
REQUESTS FOR INSTRUCTIONS : Instructions shall be submitted in accordance with the court's Pre-Trial Order, dated July 16, 2004.
AMENDMENTS TO PLEADINGS : In an order dated March 4, 2004, the court denied defendants' motion to amend the counterclaim based on undue delay and prejudice is the amendment were allowed.
DISCOVERY : Discovery has been completed.
TRIAL SETTING : The case was set for trial with a jury on August 2, 2004, commencing at 8:30 a.m. in Salt Lake City, Utah.
POSSIBILITY OF SETTLEMENT : Possibility of settlement is considered poor.