American Bullion, Inc. v. Regal Assets, LLC
2:14-cv-01873
| C.D. Cal. | Dec 30, 2014Background
- American Bullion and Regal Assets compete in marketing precious-metals IRAs; dispute centers on Regal’s use of paid affiliates that allegedly post false statements and fail to disclose their financial relationship.
- Plaintiff sued under the Lanham Act and multiple state-law claims (false advertising, unfair competition, defamation, interference) and sought a preliminary injunction.
- The court initially found Regal’s affiliates likely to be Regal’s agents, and granted a preliminary injunction under the Winter standard.
- Regal moved for reconsideration and/or modification, arguing procedural unfairness, evidentiary error (Berkeley III declaration), First Amendment constraints, changed circumstances (new affiliate agreement, monitoring, terminations), and errors in agency/liability analysis.
- The court granted reconsideration in part, addressed the Berkeley evidence, modified portions of the injunction (e.g., photo restrictions, neutrality language), stayed the injunction 30 days for compliance, but otherwise concluded a preliminary injunction remains warranted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Reconsideration/Procedural Fairness | Order was proper; Berkeley III was rebuttal and properly considered. | Defendants: court relied on evidence submitted on reply and denied opportunity to be heard; due process violated. | Court granted reconsideration in part to allow fuller consideration of Berkeley III but rejected Defendants’ due-process claim as unpersuasive. |
| First Amendment / Prelim. Injunction for Commercial Speech | False/misleading commercial speech is not protected; injunction appropriate given evidence of falsity. | Injunction would be prior restraint; Winter standard inappropriate for speech; court must make special findings. | Court: false or misleading commercial speech is unprotected; Winter applies; injunction permissible but certain provisions (photo restriction, unclear neutrality language) must be narrowed. |
| Agency and Principal Liability for Affiliate Conduct | Regal controls affiliates; affiliates likely agents; Regal liable for affiliates’ false advertising and related acts. | Regal: complaint pleads intentional acts only; principal cannot be liable for agents’ intentional torts absent ratification; court improperly relied on negligence principles. | Court: agency question central and supported; California law (including §§2238/2339 and Kephart) allows principal liability for agents’ wrongful acts when foreseeable/outgrowth of employment; ratification/distributed payment structure supports liability. |
| Changed Circumstances / Modification of Injunction | Injunction should remain to prevent ongoing harm. | Regal: new affiliate agreement, outside monitor, new GC, termination of affiliates change the basis for injunction; injunction should be vacated or modified. | Court: changes welcome but do not alter fundamental commission-based relationship; new contract language insufficient to avoid liability; injunction modified but remains in effect after 30-day stay. |
Key Cases Cited
- Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008) (preliminary injunction standard requires likelihood of success, irreparable harm, balance of equities, and public interest)
- Hoffman v. Capital Cities/ABC, Inc., 255 F.3d 1180 (9th Cir. 2001) (false or misleading commercial speech unprotected by First Amendment)
- Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharm. Co., 290 F.3d 578 (3d Cir. 2002) (courts may issue preliminary injunctions in false-advertising disputes)
- Vidal Sassoon, Inc. v. Bristol-Myers Co., 661 F.2d 272 (2d Cir. 1981) (preliminary relief in false-advertising context)
- Osmose, Inc. v. Viance, LLC, 612 F.3d 1298 (11th Cir. 2010) (affirming injunction in false-advertising case)
- Kephart v. Genuity, Inc., 136 Cal. App. 4th 280 (Cal. Ct. App. 2006) (principal liability where employment predictably creates risk of intentional torts)