court allows company to bring right of publicity claim

Youngevity Int’l, Corp. v. Smith, No. 16-cv-00704, 2016 WL 7626584 (S.D. Cal. Dec. 1, 2016)

Youngevity and Dr. Joel D. Wallach sell various health supplements using independent direct sellers known as “distributors” to move product. The individual defendants were former Youngevity distributors and / or employees. Defendants Wakaya and TNT were companies formed by some of the individual defendants competing with Youngevity. For about seventeen years, TNT ran various websites that explicitly used plaintiffs’ likenesses [sadly, the court believes that both Wallach and Youngevity have separate claims, even though Youngevity doesn’t have a “likeness”; the court does not address the scope of a ROP claim, however, so there is no specific legal ruling]. Plaintiffs terminated the parties’ business relationship and demanded cessation of this use, but defendants didn’t stop.

Under California law, misappropriation of likeness requires “(1) the defendant’s use of the plaintiff’s identity; (2) the appropriation of plaintiff’s name or likeness to defendant’s advantage, commercially or otherwise; (3) lack of consent; and (4) resulting injury.” Until March 2016, defendants had implied consent to use plaintiffs’ likenesses; defendants argued that the single publication rule barred plaintiffs from terminating consent so long as the use was consistent.  “In the context of websites, republication does not occur so long as the statement is not substantively altered or directed to a new audience,” and defendants argued that they hadn’t changed the use in the two years before the complaint, thus precluding a claim.  The court disagreed, because not all the elements of the claim had accrued more than two years ago: there were no grounds for suit when consent existed.  The court was not going to “categorically deny a plaintiff the right to terminate consent to the continued but unchanged use of a plaintiff’s likeness after two years.”  Thus, plaintiffs were entitled to preliminary injunctive relief. It was undisputed that the defendants used the websites to get contact information for customers who wanted to buy Youngevity products and advertised a website marketing their own products, falsely suggesting that some of those products were produced and/or endorsed by plaintiffs. “A competitor’s access to a company’s confidential customer information can clearly cause very serious damage to a company’s market share and business goodwill that is impossible to measure and compensate via money damages.”

The court also rejected some other challenges to plaintiffs’ claims on a motion to dismiss.  For example, plaintiffs successfully alleged Lanham Act false advertising in alleging that Wakaya made false statements regarding how much money a Wakaya distributor could potentially earn: “a year from now, many of us will be million dollar earners,” even though no Wakaya distributor has ever earned this amount of money. This statement was allegedly made in a YouTube video; defendants argued that there was no showing that the video came from a Wakaya agent, but at the pleading stage, an allegation to this effect was enough to give sufficient notice.  So too with an allegedly false claim in a YouTube video that Wakaya was a joint venture with billionaire David Gilmour, founder of the Fiji Water Company. However, more conclusory statements that Wakaya falsely advertised that (1) Youngevity was having financial problems and (2) Wakaya products originate from Fiji, without any details regarding “where” and “when” Wakaya allegedly made the statements, were insufficient. So too with allegations that Wakaya was a pyramid scheme and thus claims that its distributors could earn a lot of money were false.

Plaintiffs also alleged that Wakaya’s advertisements of the health benefits of its “pure Calcium Bentonite Clay” products was false or misleading because these products contains high dosages of lead, which is very dangerous. Defendants argued that there was no falsity because the challenged Facebook post didn’t specifically disclaim lead related health hazards. However, read as a whole, the post “tends to suggest that the clay products are overall good for a person’s health,” which would be false if the products did in fact contain high lead levels.

The court adopted the majority federal approach to claims brought by competitors under California’s FAL, which holds that third party/consumer reliance on false claims doesn’t allow a damaged competitor to sue in the absence of the competitor’s own reliance and resulting damage.

Defendants were enjoined to cease operation of 1-800-WALLACH, myyoungevity.com, and wallachonline.com.Youngevity Int’l, Corp. v. Smith, No. 16-cv-00704, 2016 WL 7626584 (S.D. Cal. Dec. 1, 2016)

Youngevity and Dr. Joel D. Wallach sell various health supplements using independent direct sellers known as “distributors” to move product. The individual defendants were former Youngevity distributors and / or employees. Defendants Wakaya and TNT were companies formed by some of the individual defendants competing with Youngevity. For about seventeen years, TNT ran various websites that explicitly used plaintiffs’ likenesses [sadly, the court seems to think that both Wallach and Youngevity have separate claims, even though Youngevity doesn’t have a “likeness”]. Plaintiffs terminated the parties’ business relationship and demanded cessation of this use, but defendants didn’t stop.

Under California law, misappropriation of likeness requires “(1) the defendant’s use of the plaintiff’s identity; (2) the appropriation of plaintiff’s name or likeness to defendant’s advantage, commercially or otherwise; (3) lack of consent; and (4) resulting injury.” Until March 2016, defendants had implied consent to use plaintiffs’ likenesses; defendants argued that the single publication rule barred plaintiffs from terminating consent so long as the use was consistent.  “In the context of websites, republication does not occur so long as the statement is not substantively altered or directed to a new audience,” and defendants argued that they hadn’t changed the use in the two years before the complaint, thus precluding a claim.  The court disagreed, because not all the elements of the claim had accrued more than two years ago: there were no grounds for suit when consent existed.  The court was not going to “categorically deny a plaintiff the right to terminate consent to the continued but unchanged use of a plaintiff’s likeness after two years.”  Thus, plaintiffs were entitled to preliminary injunctive relief. It was undisputed that the defendants used the websites to get contact information for customers who wanted to buy Youngevity products and advertised a website marketing their own products, falsely suggesting that some of those products were produced and/or endorsed by plaintiffs. “A competitor’s access to a company’s confidential customer information can clearly cause very serious damage to a company’s market share and business goodwill that is impossible to measure and compensate via money damages.”

The court also rejected some other challenges to plaintiffs’ claims on a motion to dismiss.  For example, plaintiffs successfully alleged Lanham Act false advertising in alleging that Wakaya made false statements regarding how much money a Wakaya distributor could potentially earn: “a year from now, many of us will be million dollar earners,” even though no Wakaya distributor has ever earned this amount of money. This statement was allegedly made in a YouTube video; defendants argued that there was no showing that the video came from a Wakaya agent, but at the pleading stage, an allegation to this effect was enough to give sufficient notice.  So too with an allegedly false claim in a YouTube video that Wakaya was a joint venture with billionaire David Gilmour, founder of the Fiji Water Company. However, more conclusory statements that Wakaya falsely advertised that (1) Youngevity was having financial problems and (2) Wakaya products originate from Fiji, without any details regarding “where” and “when” Wakaya allegedly made the statements, were insufficient. So too with allegations that Wakaya was a pyramid scheme and thus claims that its distributors could earn a lot of money were false.

Plaintiffs also alleged that Wakaya’s advertisements of the health benefits of its “pure Calcium Bentonite Clay” products was false or misleading because these products contains high dosages of lead, which is very dangerous. Defendants argued that there was no falsity because the challenged Facebook post didn’t specifically disclaim lead related health hazards. However, read as a whole, the post “tends to suggest that the clay products are overall good for a person’s health,” which would be false if the products did in fact contain high lead levels.

The court adopted the majority federal approach to claims brought by competitors under California’s FAL, which holds that third party/consumer reliance on false claims doesn’t allow a damaged competitor to sue in the absence of the competitor’s own reliance and resulting damage.

Defendants were enjoined to cease operation of 1-800-WALLACH, myyoungevity.com, and wallachonline.com.