Thursday, June 16, 2022

claim against allegedly deceptive charity marketing mainly survives motion to dismiss

Puterbaugh v. Oorah, Inc., No. SACV 21-01593-CJC (DFMx), 2022 WL 2046102 (C.D. Cal. Jan. 27, 2022)

Plaintiff alleged that defendants Oorah, Kars4Kids, and JOY violated the FAL and UCL “because, contrary to what their advertisements say and suggest, (1) their charity efforts benefit not all children, but primarily Orthodox Jewish children in New York and New Jersey, (2) some of the charitable donations received go toward risky real estate investments, and (3) much of the charitable donations received go toward paying Defendants’ operating costs.” Although the court kicked out claims against some defendants, the motion to dismiss/anti-SLAPP motion was otherwise denied.

Plaintiff alleged that TV ad led him to believe that Kars4Kids “provide[d] moneys for disadvantaged children in California (and throughout America).” A Kars4Kids representative he spoke with on the phone allegedly told him that if he made a donation, the money raised would “only be used to help needy kids,” and that the organization “take[s] only a small amount for [its] costs.” So he donated his 2001 Volvo to Kars4Kids.

But, in fact, he alleged, Kars4Kids helps only a small subset of kids, some of whom were wealthy; also, it failed to disclose that it gives its donations not to kids but to Oorah, “which invests in real estate, but which has lost millions of dollars in donations on failed real estate investments,” and that its operating costs “leav[e] only nominal amounts for charitable purposes.”

Plaintiff adequately alleged deceptiveness for purposes of a motion to dismiss: The ads were plausibly misleading because a reasonable consumer would not understand from them that “(1) the category of benefitting children from any donation is narrow, (2) some of a donation could go to risky real estate investments, and (3) much of a donation could go to Defendants’ operating costs.” The allegations also satisfied Rule 9(b). Compensatory and punitive damages, however, were unavailable.

Oorah was kicked out because, under the FAL/UCL, a plaintiff “must show the defendant personally participated in the allegedly unlawful practice; vicarious liability is not available.” “A defendant’s liability must be based on his personal ‘participation in the unlawful practices’ and ‘unbridled control’ over the practices that are found to violate section 17200 or 17500.” This, plaintiff didn’t allege as to Oorah, though it did as to JOY, which was allegedly a “division or part” of Kars4Kids that “does nothing other than run Kars-4-Kids” or is “otherwise intimately connected” to Kars4Kids whose website contains similar misleading statements, including that Kars4Kids donations will help “[c]hang[e] a child’s life for the better” and “help[ ] children get a good start in life.”

For similar reasons, the anti-SLAPP motion failed: Even assuming this was noncommercial speech, and even assuming defendants were engaged in protected activity, plaintiff met his “relatively low” burden of showing that the complaint was both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if his evidence was credited.

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