(c) infringement and false advertising claims against addiction treatment competitor survive, in part

New Directions Program v. Sierra Health & Wellness Centers LLC, 2023 WL 7284797, No. 2:22-cv-01090-DAD-JDP (E.D. Cal. Nov. 1, 2023)

Plaintiff Gust is the “principal and owner” of plaintiff New Directions and “has been an expert in the field of treatment of addiction and intoxication for decades.” Gust allegedly “developed an outpatient treatment model based on the principle of addiction as a pathological relationship to intoxication rather than as a preference [for] a specific drug.”

One of Gust’s students was Daily, the founder of defendant RHCS (now owned by Sierra); when he passed away, his wife—also a defendant—took over. Plaintiffs allege that defendants falsely claimed credit for the “Gust method,” and infringed the copyright in Gust’s book Effective Outpatient Treatment for Adolescents by using copies with clients, copying two appendices for a recorded presentation, and copying the book in a brochure listing six stages of recovery that are identical to those described in the book.

The court first found that the Lanham Act claim was grounded in fraud and had to satisfy Rule 9(b).

Challenged statement: “Jon Daily’s legacy will continue as [Sierra Health and Wellness] will keep all of their intensive outpatient program with the name Recovery Happens and his model of care.” This was allegedly false because “Jon Daily had no model of care” and used the Gust model. (Those two statements are arguably in some tension.) The “when” was insufficiently alleged, so the court didn’t inquire further.

Challenged statement: “Sierra Health and Wellness and New Start Recovery Solutions are proud ... to offer the compassionate, insightful and whole person outpatient addiction treatment philosophy founded by Jon Daily.” The court found plaintiffs plausibly alleged that the addiction treatment philosophy at issue was not, in fact, founded by Daily, and that consumers would have no reason to doubt this claim. Materiality was also sufficiently pled; the court credited plaintiffs’ argument that being connected to “the legacy of an innovator in the field” makes it more likely that a product will be chosen by consumers and makes defendants seem “more substantial, credible and credentialed.” Plus, plaintiff Gust “practices in the same building as [the moving defendants],” so “even minor perceived differences between the two practices could plausibly influence consumers’ decisions.”

You may be wondering: what about Dastar and Sybersound’s extension of that reasoning, which is binding on this court? So is the court! It wasn’t going to evaluate the issue sua sponte, but it suggested that plaintiffs be prepared to address the Dastar issues if they amended the complaint. (Presumably it should feature in the answer as well.)

Challenged statement: in a section titled “the relevance of Jon Daily,” defendants’ websites state: “ ‘ADDICTION is a PATHOLOGICAL RELATIONSHIP to INTOXICATION.’ ” But Gust allegedly “developed the concept of ‘addiction to intoxication’ years before Jon Daily even entered the field.” Plaintiffs plausibly alleged misleadingness in giving Daily credit for that idea, and materiality for the reasons noted above.

 Challenged statement: Daily “believed that individuals become addicted to INTOXICATION as a way of dealing with life issues. If you remove the drug—the individual who is still addicted to intoxication will find another way to get high. For example, by using another substance or activity such as sex or gambling.”  Plaintiffs alleged that these “are all words that David Gust taught for many years” and that “[a]ttribution to Jon Daily is false and misleading ....” This wasn’t sufficiently alleged to constitute deceptive attribution to Daily as innovator.

Challenged material: a video in which Daily “uses the Gust phrase ‘Addiction to Intoxication’ ”; Gust’s book “can be seen on the video”; Daily “makes a statement that ... is clearly just [Chapter 1 from plaintiff Gust’s book, “How to Help Your Child Become Drug Free”], repurposed”; and Daily had “taken verbatim” plaintiff Gust’s “old series of projector slides” to use as his own PowerPoint slide headers without attribution. Again, plaintiffs didn’t sufficiently allege deception/that Daily claimed to have created the ideas.

Other statements dismissed as puffery: “ ‘Exceed the expectations of our clients’, ‘World Class’ and ‘Unlike any other in Northern California.’ ” as well as statements that defendants use “evidence based methods.”

Copyright: For the book, plaintiffs didn’t allege facts indicating that defendants engaged in direct copying or unlawful appropriation.  It was not enough to allege conclusorily that “defendants have copied portions of this Book and have used and published copies of portions of this book including copying and using treatment documents with clients ....”

DVD: The question was whether plaintiffs sufficiently alleged probative similarity between defendant’s DVD and two appendices to the book, “the core of the intervention phase of the Gust model.” Plaintiffs alleged that Gust’s book “describes the main topics explored in [the Gust] process as, ‘School, Family Relationship, Motivation, Legal Issues, Friendship and Social life, Employment, Finances, Physical health, self image/self respect/emotions, Additional examples’ ” And the DVD allegedly uses a slide that reads “ ‘self inventory: where to explore in the process’ ” and lists the following categories: “ ‘Family, Money, School, Sports, Legal Issue, Health, Mental Health, Friends, Self, Spirituality, Sexuality, Additional Examples.’ ” This allowed a reasonable inference that there wasn’t independent creation. “These similarities and unusual features are not de minimis and permit the court to draw the reasonable inference that the two lists are substantially similar under the extrinsic test. The court need not engage in the application of the intrinsic test in considering a motion to dismiss.”

A similar result on the brochure, where the overlap was in describing the six stages of recovery: Recognition, Admission, Petition, Acceptance, Volition, Conversion. I really can’t believe that should be sufficient, but I recognize that in the Ninth Circuit there is essentially no minimum boundary for actionable copying before, at least, summary judgment if a factfinder could actually see the similarity.