Antitrust Law Daily Wrap Up, ADVERTISING—C.D. Cal.: Precious metals dealers’ Lanham Act, UCL, RICO claims proceed against competitor, (Apr 22, 2015)

By Linda O’Brien, J.D., LL.M.

A precious metal dealer alleged sufficient facts to pursue claims against a competing dealer and its affiliates for engaging in false advertising, unfair competition, and racketeering by operating websites that purported to offer independent, objective reviews of the competitor and included disparaging information regarding the complaining dealer, the federal district court in Los Angeles has ruled. Thus, the defendants’ motion to dismiss was denied (Goldline, LLC v. Regal Assets, LLC, April 21, 2015, Pregerson, D.).

Goldline LLC is a retail dealer of gold and other precious metals to investors and collectors. Since 1974, the dealer has conducted business under the GOLDLINE and other related registered trademarks and uses the marks prominently on its websites, television, print advertising, and video commercials.

Regal Assets, a competing dealer, promotes its products and services through affiliates, which operate websites that have no apparent connection to Regal. Regal purchased advertising keywords that include the GOLDLINE, so their websites would appear in search results intended for Goldline. Regal also prepares scripts and website materials for affiliates’ use that purport to offer independent evaluations of precious metal dealers. Goldline filed suit against Regal and several individuals, alleging in part that materials offered false information about the independent, unbiased reviews of Regal and included disparaging information about Goldline, in violation of the Lanham Act, the California False Advertising Law (FAL), the California Unfair Competition Law (UCL), and the Racketeer Influenced and Corrupt Organizations Act (RICO). The defendants moved to dismiss the complaint.

False advertising claims. The court determined that the plaintiff adequately stated claims with sufficient particularity for false advertising under the Lanham Act and the FAL and unfair competition under the UCL. Goldline alleged that its and Regal’s products were sold in interstate commerce and that the defendants engaged in specific false, deceptive, and misleading advertising regarding Goldline and Regal’s products. The plaintiff also alleged that the false statements were intended to deceive the public, disparage Goldline, and divert customers away from Goldline and Goldline suffered injury to its business, reputation, and goodwill. The allegations were sufficient to satisfy the requisite elements of both claims, in the court’s view.

RICO claims. To plead a claim under RICO, a plaintiff must allege conduct of an enterprise through a pattern of racketeering activity that injured his business or property. In this case, Goldline alleged that Regal and its affiliates operated a scheme whereby (1) Regal paid commissions to affiliates to operate websites over the Internet; (2) Regal provided scripts to the affiliates that falsely advertised and fraudulent represented Goldline’s products and services; (3) the purpose of the scheme was to divert customers to Regal; (4) proceeds from the scheme were used to perpetuate the operation; and (5) Goldline lost sales and goodwill as a result of the scheme. The court concluded that the allegations satisfied the pleading requirements for a RICO claim.

The case is No. CV 14-03680.

Attorneys: Linda C. Miller Savitt (Ballard Rosenberg Golper and Savitt LLP) for Goldline, LLC. Justin Morgan Crane (The Myers Law Group, APC) for Regal Assets LLC.

Companies: Goldline, LLC; Regal Assets, LLC

Cases: Advertising StateUnfairTradePractices RICO CaliforniaNews