trax v. prize candle - opposition to motion to dismiss.pdf
TRANSCRIPT
PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTPRIZE CANDLE LLC’S MOTION TO DISMISS
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KAZEROUNI LAW GROUP, APC Abbas Kazerounian, Esq. (SBN: 249203) [email protected] Mohammad Kazerouni, Esq. (SBN: 252835) [email protected] Mona Amini, Esq. (SBN: 296829) [email protected] 245 Fischer Avenue, Unit D1 Costa Mesa, CA 92626 Telephone: (800) 400-6808 Facsimile: (800) 520-5523
[ADDITIONAL COUNSEL ON SIGNATURE PAGE]
Attorneys for Plaintiff, Thomas Trax
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
///
THOMAS TRAX;INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
Plaintiff,
v.
PRIZE CANDLE, LLC,
Defendant.
Case No.: 3:15-cv-01563-CAB-KSC
PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT PRIZE CANDLE, LLC’S MOTION TO DISMISS
Without Oral Argument Per Court’s Order [ECF. No. 11]
Judge: Hon. Cathy Ann Bencivengo Date Filed: July 15, 2015 FAC Filed: October 22, 2015
Case 3:15-cv-01563-CAB-KSC Document 14 Filed 12/29/15 Page 1 of 21
TABLE OF CONTENTS & TABLE OF AUTHORITIES PAGE I OF IV
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TABLE OF CONTENTS
I. INTRODUCTION .................................................................................... 1
II. STATEMENT OF FACTS ...................................................................... 3
III. LEGAL STANDARD ............................................................................... 5
IV. ARGUMENT ............................................................................................ 6
A. PRIZE CANDLE OPERATES AN ILLEGAL LOTTERY ........................... 6 B. PRIZE CANDLE’S WEBSITE DOES NOT OFFER A
LEGITIMATE ALTERNATIVE MEANS OF ENTRY TO WIN A PRIZE AND EMPHASIZES THE LOTTERY ASPECT OF PRIZE CANDLE’S BUSINESS ........................................... 10 1) Prize Candle’s Website Fails to Offer an
Alternative Means of Entry ........................................................ 10
2) Prize Candle’s Website Emphasizes the Lottery Aspect of its Business .................................................... 11
C. PLAINTIFF HAS STANDING TO ASSERT UCL AND CLRA CLAIMS ......................................................................... 13 D. NEGLIGENCE PER SE ....................................................................... 14
V. ALTERNATIVE LEAVE TO AMEND ............................................... 15
VI. CONCLUSION ...................................................................................... 15
Case 3:15-cv-01563-CAB-KSC Document 14 Filed 12/29/15 Page 2 of 21
TABLE OF CONTENTS & TABLE OF AUTHORITIES PAGE II OF IV
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TABLE OF AUTHORITIES Cases Ashcroft v. Iqbal,
556 U.S. 662 (2009) .................................................................................. 5, 14
Barker v. Riverside County Office of Educ.,
584 F.3d 821 (9th Cir. 2009) ............................................................................ 5
Bell Atlantic. Corp. v. Twombly,
550 U.S. 544 (2007) .................................................................................. 5, 14
California Gasoline Retailers v. Regal Petroleum Corp.,
50 Cal.2d 844 (1958) ............................................................................... 1, 6, 8 Couch v. Telescope Inc. and Herbert et al. v. Endemol USA, Inc.,*
Case No. CV-07-3916-FMC (PLAx) ...................................................... 7, 8, 9
*Attached to the Declaration of Annasara Purcell as Exhibit D
Finster v. Keller,
18 Cal.App.3d 836 (1971) ........................................................................... 2, 6
Hall v. City of Santa Barbara,
833 F.2d 1270 (9th Cir. 1986). ........................................................................ 5
Haskell v. Time, Inc.,
965 F. Supp. 1398 (E.D. Cal.1997). ................................................................ 8
Kroger v. Cook,
265 N.E.2d 780 (Ohio 1970) ........................................................................... 8
Lee v. City of Los Angeles,
250 F.3d 668 (9th Cir. 2001) ........................................................................... 5
McDougal v. County of Imperial,
942 F.2d 668 (9th Cir. 1991) ............................................................................ 5
Midwestern Enters. v. Stenehjem,
625 N.W.2d 234 (N.D. 2001). ......................................................................... 9
//
Case 3:15-cv-01563-CAB-KSC Document 14 Filed 12/29/15 Page 3 of 21
TABLE OF CONTENTS & TABLE OF AUTHORITIES PAGE III OF IV
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Nguyen v. Tran,
157 Cal. App. 4th 1032 (2007). ..................................................................... 11
NL Industries, Inc. v. Kaplan,
792 F.2d 896, 898 (9th Cir.1986) .................................................................... 5
People v. Cardas,
137 Cal.App. Supp. 788 (Dep’t Super. Ct.1933) ............................................ 7
People v. Carpenter,
141 Cal.App.2d 884 (Ct.App.1956) ................................................................ 7
People v. Shira,
62 Cal. App. 3d 442 (1976) ..................................................................... 1, 6, 8
Ramirez v. Plough, Inc.,
6 Cal.4th 539 (1993) ..................................................................................... 15
Smith v. Jackson,
84 F.3d 1213 (9th Cir. 1996). .......................................................................... 5
State ex rel. Schillberg v. Safeway Stores, Inc.,
450 P.2d 949 (Wash. 1969). ............................................................................ 8
Theranos, Inc. v. Fuisz Pharma LLC,
76 F. Supp. 2d 1123 (N.D. Cal. 2012) .......................................................... 14
U.S. S.E.C. v. ICN Pharm., Inc.,
84 F. Supp. 2d 1097 (C.D. Cal. 2000) ............................................................. 5
Usher v. City of Los Angeles,
828 F.2d 556 (9th Cir. 1987) ......................................................................... 14
Vess v. Ciba-Geigy Corp. USA,
317 F.3d 1097 (9th Cir. 2003) ....................................................................... 6
Walling v. Beverly Enters.,
476 F.2d 393 (9th Cir. 1973) ...................................................................... 5, 14
Westlands Water Dist. v. Firebaugh Canal,
10 F.3d 667 (9th Cir.1993) .............................................................................. 5
Case 3:15-cv-01563-CAB-KSC Document 14 Filed 12/29/15 Page 4 of 21
TABLE OF CONTENTS & TABLE OF AUTHORITIES PAGE IV OF IV
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Statutes Cal. Bus. & Prof. Code §§ 17200, et seq ......................................................... 1, 3, 15
Cal. Civ. Code § 17204 ........................................................................................... 13
Cal. Civ. Code § 17203 ........................................................................................... 13
Cal. Civ. Code §§ 1750, et seq ........................................................................ 1, 3, 15
Cal. Civ. Code § 17535 ........................................................................................... 13
Cal. Civ. Code § 1780(a) ......................................................................................... 13
Cal. Penal Code § 319 ...................................................................................... passim
Rules Fed. R. Civ. P. 12(b)(6) ......................................................................................... 5, 6
Fed. R. Civ. P. 15(a) ................................................................................................ 15
Case 3:15-cv-01563-CAB-KSC Document 14 Filed 12/29/15 Page 5 of 21
PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT PRIZE CANDLE LLC’S MOTION TO DISMISS PAGE 1 OF 16
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I. INTRODUCTION
Plaintiff THOMAS TRAX (“Plaintiff”) hereby submits this Memorandum of
Points and Authorities in Opposition to Defendant PRIZE CANDLE, LLC’s
(“Defendant “ and/or “Prize Candle”) Motion to Dismiss.
Plaintiff initiated the present putative class action against Prize Candle for
unlawfully owning and operating lotteries as defined by Cal. Penal Code § 319 in
violation of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code
§§ 17200 et seq.; Consumers Legal Remedies Act (“CLRA”), Cal. Civ. Code §
1750, et seq.; and negligence per se. See ECF No. 5, Plaintiff’s First Amended
Complaint (“FAC”) ¶ 1. It is well settled and rooted in the California Constitution
that California has a strong public policy against private lotteries. People v. Shira,
62 Cal.App.3d 442, 452 (1976). Notwithstanding a few narrow exceptions, “the
Legislature has no power to authorize lotteries and shall prohibit the sale of lottery
tickets in the state.” California Constitution, Article IV, section 19. Id. ¶ 2.
A lottery is defined as “any scheme for the disposal or distribution of
property by chance, among persons who have paid or promised to pay any valuable
consideration for the chance of obtaining such property or a portion of it... upon
any agreement, understanding, or expectation that it is to be distributed or disposed
of by lot or chance....” Cal. Penal Code § 319. Id. ¶ 4. In other words, a lottery is
any scheme that contains the following three elements: (1) a prize, (2) a chance
distribution of the prize, and (3) consideration. California Gasoline Retailers v.
Regal Petroleum Corp., 50 Cal.2d 844, 851 (1958). Id.
In distinguishing a lawful promotional giveaway from an unlawful lottery,
courts often focus on whether the element of consideration is present. In doing so,
courts analyze whether the scheme’s “general and indiscriminate distribution” of
free entries is adequate to eliminate the element of consideration, thus, creating a
lawful promotional giveaway. Shira, supra, 62 Cal.App.3d at 459. Under this
analysis, “in order for a promotional giveaway scheme to be legal any and all
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PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT PRIZE CANDLE LLC’S MOTION TO DISMISS PAGE 2 OF 16
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persons must be given a ticket free of charge and without any of them paying for
the opportunity of a chance to win the prize.” (Ibid). Courts are quick to caution,
however, that “[i]n determining whether the [scheme] is in the nature of a lottery,
[they] look, not to the name, but the game. Courts will not tolerate subterfuge,
however ingenious may be the scheme devised to evade the law.” Id. at 461
[quoting Finster v. Keller, 18 Cal.App.3d 836, 842 (1971). Id. ¶ 5.
Prize Candle owns and operates unlawful lotteries by manufacturing and
selling products, including the candle purchased by Plaintiff, with the promise that
each candle contains a hidden ring and a chance to win a prize valued up to $5,000.
Id. ¶¶ 7-8. Plaintiff contends that Defendant, in offering a chance to win a prize in
exchange for consideration, operates an illegal lottery in violation of California
Penal Code § 319, among other statutes.
In response to Plaintiff’s action, Prize Candle has filed the present Motion to
Dismiss, contending that Plaintiff’s claims should be dismissed, based primarily on
Defendant’s argument that Prize Candle does not operate a lottery. However,
Defendant’s motion must be denied, as it is clear that Prize Candle’s business
model is an illegal lottery and Plaintiff has proper standing to bring the
abovementioned claims for this Court’s consideration. Furthermore, whether
Defendant’s conduct in unlawfully operating lotteries violates the UCL, CLRA, or
is negligent per se are factually driven inquiries that are inappropriate for
resolution on a Motion to Dismiss. Therefore, for these reasons and as further
discussed herein, Defendant’s motion should be denied.
//
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//
//
//
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PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT PRIZE CANDLE LLC’S MOTION TO DISMISS PAGE 3 OF 16
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II. STATEMENT OF FACTS
Plaintiff, Thomas Trax, initiated the present action on July 15, 2015 against
Defendant Prize Candle, LLC. See ECF No. 1. Subsequently, Plaintiff filed his
First Amended Complaint (“FAC”). See ECF No. 5. The operative pleadings
allege that Defendant’s business model constitutes an unlawful and illegal lottery,
in violation of Cal. Penal Code § 319, California’s Unfair Competition Law
(“UCL”), Cal. Bus. & Prof. Code §§ 17200 et seq.; Consumers Legal Remedies
Act (“CLRA”), Cal. Civ. Code § 1750, et seq.; and negligence per se. Id. Plaintiff
purchased a Gardenia scented candle giving rise to this action on or about June 5,
2015, from Prize Candle’s website1 (Id. ¶ 25), which is like the majority, if not all,
of Defendant’s other products which similarly offer a chance to win a prize valued
up to $5,000.
Prize Candle markets and/or sells products that are essentially lottery tickets.
Specifically, Prize Candle sells products, including the candle purchased for
consideration by Plaintiff, with the promise that each candle contains a hidden ring
and a chance to win a prize valued up to $5,000. Id. ¶¶ 7-8, and 16. Prize
Candle’s name itself and marketing of its products emphasizes the lottery aspect of
its business practice. Id. ¶ 17. The value of the specific hidden item and the
chances to win the $5,000 prize is not disclosed at the time of the purchase; rather,
each purchaser is simply promised that by purchasing and burning Defendant’s
candles, s/he has a chance to win a ring or charm bracelet of varying value and also
a chance to win a $5,000 prize. Id. ¶ 18. Defendant makes these promises
1 Defendant nonsensically mentions in Defendant’s Motion, p. 4, Fn. 1 that “Plaintiff’s purchase occurred just a week after on of the law firms representing Plaintiff in this lawsuit (Gottlieb and Associates) filed a very similar lawsuit. Plaintiff finds this footnote irrelevant and Defendant’s mention of Gottlieb and Associates and attachment of the docket report and pleadings in Guzman v. Diamond Candles, LLC is wholly immaterial to Plaintiff’s action and Defendant’s Motion. Accordingly, Plaintiff disregards Defendant’s footnote.
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PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTPRIZE CANDLE LLC’S MOTION TO DISMISS PAGE 4 OF 16
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throughout its website and other advertisements. Defendant’s website also induces
consumers to join the Prize Candle membership club by touting its membership
perks and claiming that “[e]very candle contains a $25 ring, with a chance to win
a ring valued up to $5,000.”2 Id. ¶ 19.
In a Medium.com article from May 2015, Defendant’s representative stated
that Defendant “[h]as delighted users … [by] …, shipping over 400,000 candles in
2014; Prize Candle has distributed over $12 million in prizes!”3 Id. ¶ 22. Such
growth would be unprecedented for a mere candle or scented product company, but
not for a company offering consumers unregulated opportunity on the internet to
pay to play a game of chance. Id. ¶ 23. It can reasonably be inferred that Prize
Candle’s exponential growth is attributable to more than the mere sale of candles,
and likely a result the lottery aspect of Prize Candle’s business, which draws
consumers in with the chance to win a prize through the purchase of its products. Consumers are particularly vulnerable to these deceptive and fraudulent
practices. Most consumers possess limited knowledge of the applicable lottery
laws. Id. ¶ 27. As such and due to Defendant’s scheme to defraud the market,
members of the general public were not only fraudulently induced to purchase
Defendant’s products, but also induced to purchase Defendant’s products at a
higher price. Id. ¶28. California laws are designed to protect consumers from such
predatory conduct. Defendant’s scheme to defraud consumers for its own self-
interest and monetary gain is ongoing and will victimize consumers daily for the
foreseeable future unless altered by judicial intervention. Plaintiff and each
member of the Class suffered an “injury in fact” because Defendant took the
consumers’ money as a result of Defendant’s predatory business practice. Id. ¶ 29-
30.
2 See, https://www.prizecandle.com. 3 See, https://medium.com/@mjones/third-year-of-science-our-startup-formula-2c46eb81ccb8#.uiqi1p99o.
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PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTPRIZE CANDLE LLC’S MOTION TO DISMISS PAGE 5 OF 16
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III. LEGAL STANDARD
To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint
need only plead “enough facts to state a claim [for] relief that is plausible on its
face.” Bell Atlantic. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is
plausible on its face “when the plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In determining whether
Plaintiff has stated sufficient facts such that the claim is plausible, “[a]ll allegations
of material facts are taken as true and construed in the light most favorable to the
nonmoving party.” Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). In
addition, the Court must also “draw inferences in the light most favorable to the
plaintiff.” Barker v. Riverside County Office of Educ., 584 F.3d 821, 824 (9th Cir.
2009); see also U.S. S.E.C. v. ICN Pharm., Inc., 84 F. Supp. 2d 1097, 1098 (C.D.
Cal. 2000) (“The court must accept as true the factual allegations of the complaint
and indulge all reasonable inferences to be drawn from them, construing the
complaint in the light most favorable to the Plaintiff.”) (citing Westlands Water
Dist. v. Firebaugh Canal, 10 F.3d 667, 670 (9th Cir.1993); NL Industries, Inc. v.
Kaplan, 792 F.2d 896, 898 (9th Cir.1986). Any existing ambiguities must be
resolved in favor of the pleading. Walling v. Beverly Enters., 476 F.2d 393, 396
(9th Cir. 1973).
A court will not normally look beyond the four corners of the complaint in
resolving a Rule 12(b)(6) motion. Lee v. City of Los Angeles, 250 F.3d 668, 688
(9th Cir. 2001). A Rule 12(b)(6) Motion to Dismiss “is viewed with disfavor and is
rarely granted.” McDougal v. County of Imperial, 942 F.2d 668, 676 n.7 (9th Cir.
1991); quoting Hall v. City of Santa Barbara, 833 F.2d 1270, 1274 (9th Cir. 1986).
Therefore, a dismissal of a plaintiff’s complaint, without leave to amend, is
appropriate only where “it appears beyond doubt that plaintiff can prove no set of
facts that would entitle her to relief.” Smith v. Jackson, 84 F.3d 1213, 1217 (9th
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PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT PRIZE CANDLE LLC’S MOTION TO DISMISS PAGE 6 OF 16
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Cir. 1996). A dismissal for failure to state a claim with Rule 12(b)(6) “should
ordinarily be without prejudice.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097,
1108 (9th Cir. 2003).
In light of the above standards, Defendant’s Motion should be denied or, in
the alternative, Plaintiff requests to be granted leave to amend.
IV. ARGUMENT
A. PRIZE CANDLE OPERATES AN ILLEGAL LOTTERY
A lottery requires three elements under California law: (1) disposition of
property; (2) upon a contingency determined by chance; (3) to a person who has
paid a valuable consideration for the chance of winning the prize. Cal. Gasoline
Retailers v. Regal Petroleum Corp., 50 Cal.2d 844, 853-44 (1958); see also Cal.
Penal Code § 319. In distinguishing a lawful promotional giveaway from an
unlawful lottery, courts often focus on whether the element of consideration is
present. In doing so, courts analyze whether the scheme’s “general and
indiscriminate distribution” of free entries is adequate to eliminate the element of
consideration, thus, creating a lawful promotional giveaway. Shira, supra, 62
Cal.App.3d at 459. Under this analysis, “in order for a promotional giveaway
scheme to be legal any and all persons must be given a ticket free of charge and
without any of them paying for the opportunity of a chance to win the prize.”
(Ibid). Courts are quick to caution, however, that “[i]n determining whether the
[scheme] is in the nature of a lottery, [they] look, not to the name, but the game.
Courts will not tolerate subterfuge, however ingenious may be the scheme devised
to evade the law.” Id. at 461 [quoting Finster v. Keller, 18 Cal.App.3d 836, 842
(1971).
Defendant’s Motion challenges only the third element of consideration,
arguing that Prize Candle’s business model constitutes a lawful promotional
sweepstakes, rather than an illegal lottery based on the premise that consumers
may enter for free without making a purchase or otherwise paying valuable
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consideration for entry. However, this argument will fail, as it is clear that Plaintiff
and similarly situated consumers paid consideration for the chance of winning a
prize from Prize Candle. Furthermore, Defendant’s Motion also fails because
Defendant cannot show that Prize Candle truly provided and marketed to
consumers a legitimate free alternative means of entry for a chance to win a prize.
Evolving case law contradicts Defendant’s assertion that Prize Candle’s
business model constitutes a lawful promotional sweepstakes, rather than an
illegal lottery because consumers may enter for free without making a purchase or
otherwise paying valuable consideration for entry. As further discussed below,
Defendant’s purported free method of entry was not truly promoted, advertised,
or even pointed out to Plaintiff and similarly situated consumers when selecting
a product and checking out on Defendant’s website. Instead, the only indication
that any alternative method of entry was available is hidden and buried in the
text visible only after finding and clicking the “Prize Candle Sweepstakes” link
located at the bottom of Defendant’s webpage.4 These facts give rise to the
issue, which will be further discussed below, of whether Defendant’s purported
alternative means of entry was offered in a manner that was real enough to
insulate Prize Candle’s business model from being considered an illegal lottery.
In Couch v. Telescope Inc. and Herbert et al. v. Endemol USA, Inc., Case
No. 07-3916 (C.D. Cal., order filed Nov. 30, 2007), the court addressed the issue in
of consideration in a modern, Internet-media context. In Couch, the defendants
moved to dismiss plaintiffs’ class action claim on the basis that the consideration
element was missing. In doing so, the Couch defendants based their argument on
three leading California lottery cases, Cal. Gasoline Retailers, 50 Cal.2d 844;
People v. Carpenter, 141 Cal.App.2d 884 (Ct.App.1956); and People v. Cardas,
137 Cal.App. Supp. 788 (Dep’t Super. Ct.1933). However, the United States
District Court for the Central District of California, relying on those cases and 4 See, https://www.prizecandle.com
Case 3:15-cv-01563-CAB-KSC Document 14 Filed 12/29/15 Page 12 of 21
PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTPRIZE CANDLE LLC’S MOTION TO DISMISS PAGE 8 OF 16
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People v. Shira, 62 Cal.App.3d 442 (Ct.App.1976), and finding no California law
to the contrary, denied the defendants’ motion. Subsequently, the Ninth Circuit
approved the district court’s ruling in its 2010 opinion.
Defendant’s Motion, like the Couch defendants’ motion, primarily relies on
those same three cases, which were all decided over fifty years ago, long before
courts could conceive of modern Internet-based commerce. Also Haskell v. Time,
Inc., which Defendant’s Motion also relies on, was decided in 1997 when the
Internet was still in its infancy. Haskell v. Time, Inc., 965 F. Supp. 1398 (E.D. Cal.
1997). The Regal, Cardas, Carpenter, and Haskell courts could not have
envisioned or foreseen a sophisticated Internet-based lottery scheme that could
exist today, such as Prize Candle’s. Indeed, Couch is firmly rooted in our modern
era, where Internet-based commerce is ubiquitous. Accordingly, this Court should
follow the Couch precedent, established by the Central District and approved by
the Ninth Circuit, rather than the outdated opinions of the Regal, Cardas,
Carpenter, and Haskell courts.
Many other courts from across the nation have found that illegal lottery or
gambling schemes existed despite the defendants’ claims that they offered a free
alternative means of entry (hereinafter “AMOE”) for their contests. For instance,
an Ohio court found the availability of an AMOE insufficient because a portion of
grocery sales proceeds funded the scheme, resulting in some entrants paying for a
chance to win. Kroger v. Cook, 265 N.E.2d 780 (Ohio 1970). Also, a Washington
court found that an illegal lottery existed because a grocery store required a visit
to the store to be entered in the contest, even though no purchase was necessary.
State ex rel. Schillberg v. Safeway Stores, Inc., 450 P.2d 949 (Wash. 1969).
Additionally, a North Dakota court noted that some states have refused to find that
an AMOE for retail sales promotions is sufficient to eliminate consideration, thus
suggesting that the court may still have found the scheme to be an illegal lottery
even if the phone cards in question were sold for fair market value. Midwestern
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Enters. v. Stenehjem, 625 N.W.2d 234 (N.D. 2001). The Attorney General of
Texas also weighed in on the subject by issuing an opinion letter stating that a
promotional scheme must also involve the legitimate sale of a product in order to
avoid characterization as a lottery.5 Tex. Att’y Gen. Op. Letter 97-008 (1997).
Thus, if a product of little or no value is being sold in conjunction with a
sweepstakes ticket, the consideration may be deemed to have been paid for the
privilege of entering the sweepstakes. Id. Moreover, the district court in Couch, in
reaching its decision, framed the relevant question as whether the contests were
“nothing more than ‘organized scheme[s] of chance,’ in which payment was
induced by the chance of winning a prize.” Couch v. Telescope Inc. and Herbert
et al. v. Endemol USA, Inc., Case No. 07-3916, slip opinion at p. 9. (C.D. Cal.,
order filed Nov. 30, 2007).
Accordingly, the key issue here is whether Prize Candle’s products are
items of equivalent economic value that the consumer received in exchange for
the money they paid, or whether the candles are nothing more than lottery ticket
delivery systems in which payment was induced by the chance of winning a prize.
In response to this key inquiry, Prize Candle will surely contend that their candles’
prices (ranging from $24.99 to $39.99 plus a minimum shipping charge of $6.99)
reflect their true value. However, a cursory Internet search revealed similar nine-
ounce, 100% soy candles infused with “essential oils” priced as low as four to six
dollars. Consequently, there is no legitimate sale of an actual product here as the
candles sold on Prize Candle’s website are nothing more than lottery ticket
delivery systems, with the lottery ticket for a chance to win a prize embedded
within the candle itself.
Therefore, based on the Central District’s decision in Couch and the
overwhelming amount of persuasive opinions from around the country, Prize
5 See a copy of the Texas Attorney General’s opinion letter attached as Exhibit A to the Declaration of Abbas Kazerounian (“Kazerounian Decl.”)
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Candle is operating an illegal lottery, rather than a lawful sweepstakes.
Furthermore, the candle’s true value is an issue for a court to decide on summary
judgment and/or a trier of fact to decide during formal proceedings rather on a
motion to dismiss. Thus, Plaintiff’s claims are valid and should survive
Defendant’s Motion. B. PRIZE CANDLE’S WEBSITE DOES NOT OFFER A LEGITIMATE
ALTERNATIVE MEANS OF ENTRY TO WIN A PRIZE AND EMPHASIZES THELOTTERY ASPECT OF PRIZE CANDLE’S BUSINESS Contrary to Defendant’s limited and selective screenshots of its website
attached to the Declaration of Annasara Purcell (“Purcell Decl.”), a visit to the
Prize Candle website does not “prominently inform consumers that no purchase or
entry fee is required and that they can obtain sweepstakes codes for free upon a
simple written request.” See Defendant’s Motion, pp. 1-2, lines 28-2. In fact, a
consumer visiting Prize Candle’s website will see a landing page which boldly
promotes Defendant’s game of chance, advertising that a $25 ring is in every
candle plus a chance to win a ring valued up to $5,000. While Defendant argues
“Prize Candle does disclose to consumers the value of the rings hidden in its
candles” (See Defendant’s Notion, p. 2, lines 16-17), Defendant cannot argue that
it discloses the value of the specific prize that a consumer has the chance of
winning though a purchase, as the purchaser is only told the prize may have a
varying value up to $5,000. FAC ¶ 18 and 49.
1. Prize Candle’s Website Fails to Offer an Alternative Means of Entry
Under the well-developed case law on lotteries, gambling, games of chance
an sweepstakes, the Courts have observed that the alternative free mode of entry
must not be so burdensome and cumbersome as to be ineffective. Here,
Defendant’s purported alternative means of entry was not offered in a manner
that was real enough to insulate Prize Candle’s business model from being
considered an illegal lottery. As stated above, Defendant’s purported free method
of entry was not truly promoted or advertised, and nothing on Defendant’s
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website directs consumers to the “Prize Candle Sweepstakes” link located at the
bottom of Defendant’s website. Instead, the only indication that any alternative
method of entry was available is hidden and buried in the text visible only after
finding and clicking the “Prize Candle Sweepstakes” link.
Defendant may attempt to argue that Prize Candle adequately provided
notice of its alternative means of entry; however, as the party with the burden of
proving, by clear and convincing evidence, that Plaintiff viewed and assented to
the terms of the sweepstakes rules, Defendant has failed to introduce any
admissible evidence to demonstrate that Plaintiff and other consumers saw or
should have seen the language in the “Prize Candle Sweepstakes” link.
Furthermore, in cases like this involving a “browse-wrap” agreement, wherein
terms and conditions are disclosed to a web user (entering into a legally binding
agreement) solely when that user clicks on a separate hyperlink to access terms and
conditions, Nguyen v. Barnes & Noble makes it clear that where a consumer is
provided access to legal terms and conditions via a “browse-wrap” agreement, that
individual has not assented to the terms and conditions that he or she is required to
separately view by clicking on said links. Nguyen v. Barnes & Noble, 763 F.3d
1171.
Thus, absent a showing that Plaintiff and similarly situated consumers
viewed and assented to Defendant’s sweepstakes rules, which is the only location
on Defendant’s website which contained the purported alternative means of entry,
Defendant will be unable to assert that these sweepstakes rules apply or were
viewed by Plaintiff and similarly situated consumers.
2. Prize Candle’s Website Emphasizes the Lottery Aspect of its Business
Defendant’s promotion and marketing of its products emphasizes the lottery
aspect of Defendant’s business practice as each of Defendant’s products are sold
for consideration with the promise that the purchaser of the products will have a
chance to win a ring of varying value up to $5,000. See FAC ¶ 48. The Prize
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Candle website also tantalizes consumers, inducing purchase of its products and
its membership with language on the main images on its home page like “WILL
YOU BE THE NEXT $5000 Prize Winner? Simply enter the code discovered in
your Prize Candle to see if you are a winner!”6 and “WARNING! Highly
Addictive! Amazing fragrances, a prize in every candle, plus a chance to win a
ring valued up to $5,000? You’ll want more than one” (See FAC ¶ 19)
emblazoned on an image of playing cards, matches and numerous ornate rings.7
The lottery aspect of Defendant’s business is even further emphasized by
Defendant’s explanation of “How It Works” on the home or main page of the
Prize Candle website as well as on the “How It Works” tab on the Prize Candle
website.8 The steps illustrated under “How It Works” simply lays out the steps
for a consumer to discover whether they are a winner of a prize valued up to
$5,000. See Exhibit D. These steps do not mention or direct a consumer to
anywhere that suggests a prize code can be obtained in any way other than
purchasing a Prize Candle product. Instead Defendant’s “How It Works” page
reflects how Defendant’s candles are nothing more than lottery ticket delivery
systems, as the illustrated steps explain that a ring and prize code are contained in
the candle, and by entering the code on the Prize Candle Appraisal Page, the
consumer will learn whether they are a winner of a prize valued up to $5,000. Id.
Accordingly, Prize Candle’s own instructions indicate that the candle is
nothing more than a lottery ticket delivery system. Three out of the four steps
focus on redeeming the code found on the lottery ticket. The terms “lucky” and
“winner” also reflect the emphasis on the business’s gambling aspect. And the
only step that even mentions the candle, supposedly the focus of Prize Candle’s
business, encourages the consumer to “burn your candle until the ring and prize
6 See, https://www.prizecandle.com; and Exhibit B attached to Kazerounian Decl. 7 See, https://www.prizecandle.com; and Exhibit C attached to Kazerounian Decl. 8 See, FAC fn. 3; https://www.prizecandle.com/pages/how-it-works and Exhibit D
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PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTPRIZE CANDLE LLC’S MOTION TO DISMISS PAGE 13 OF 16
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code become visible.” Rather than encouraging Plaintiff and similarly situated
consumers to enjoy the relaxing fragrances released by this supposedly high-
quality candle, Prize Candle’s prominently displayed instructions instead place the
emphasis squarely on obtaining the lottery ticket by burning the candle as quickly
as possible. This provides further evidence that the candle is nothing more than a
lottery ticket delivery system, and clearly emphasizes the business’s gambling
aspect over the nature and quality of its candles.
Everything immediately visible to consumers on Defendant’s website
suggests that they must purchase a candle, or in other words pay consideration,
for a chance to win a prize. Defendant’s assertion that it “prominently informs
consumers that no purchase is required” is misleading. Defendant fails to
meaningfully provide an alternative free means of entry as it is not apparent to
consumers browsing and purchasing from Defendant’s website. Furthermore, the
Prize Candle website clearly touts the gambling aspect of its business over the
quality and nature of the products it contends are the primary focus of its business.
C. PLAINTIFF HAS STANDING TO ASSERT UCL AND CLRA CLAIMS
As explained above, Plaintiff has adequately alleged that Prize Candle
operates an illegal lottery. Furthermore, Plaintiff’s claims are valid and Plaintiff
has adequate standing to assert Plaintiff’s claims. Defendant argues that Plaintiff lacks standing under the UCL and CLRA
because he has not sufficiently alleged facts showing that he lost money or
property. To bring a claim under the UCL, Plaintiff must show that he suffered
“injury in fact and lost money or property as a result of” the challenged practice.
Cal. Bus. & Prof. Code §§ 17203, 17204, 17535. Similarly, under the CLRA,
Plaintiff must show that he suffered “damage as a result of” the challenged
practice. Cal. Civ. Code § 1780(a). In the instant matter, Plaintiff easily satisfies
both these requirements as Plaintiff, who is a purchaser of a candle from
Defendant’s website, has sufficiently alleged that he has suffered an injury in fact,
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lost money, and suffered damages as a result of Defendant’s unlawful conduct.
Moreover, on a motion to dismiss, the Court “taking as true all allegations of fact
and drawing all reasonable inferences in favor of the Plaintiff.” Theranos, Inc. v.
Fuisz Pharma LLC, 76 F. Supp. 2d 1123, 1126 (N.D. Cal. 2012) (citing Twombly,
550 U.S. 544, 570; Iqbal, 556 U.S. 662, 678; Usher v. City of Los Angeles, 828
F.2d 556, 561 (9th Cir. 1987); and any existing ambiguities must be resolved in the
favor of the pleading. Walling, 476 F.2d 393, 396.
Plaintiff specifically alleges that Plaintiff paid for a Gardenia scented Prize
Candle purchased from Defendant’s website. See FAC ¶¶ 14 and 25. Plaintiff
further alleges that “due to Defendant’s scheme to defraud the market, members of
the general public were not only fraudulently induced to purchase Defendant’s
products, but also induced to purchase Defendant’s products at a higher price.” Id.
¶ 28. Plaintiff further establishes that he lost money as a result of Defendant’s
misrepresentations by alleging that Defendant’s unlawful conduct directly and
proximately cause Plaintiff and the Class actual monetary damages in the amount
of the price paid for each of Defendant’s Products; and but for Defendant’s
conduct described in Plaintiff’s FAC, Plaintiff and the Class would not have spent
money on Defendant’s products. See FAC ¶¶ 62-63. Thus, Plaintiff adequately
alleges injury and causation for standing purposes.
Accordingly, here Plaintiff has standing and sufficiently alleged his injury
and damages as a result of being induced to purchase a candle by representations
on Defendant’s website regarding the possibility of uncovering a prize valued up to
$5,000 and Plaintiff was motivated by or relied upon such deceptive marketing
scheme in deciding to purchase Prize Candle’s product.
D. NEGLIGENCE PER SE
While Plaintiff does not dispute that “negligence per se” is an evidentiary
presumption rather than an independent cause of action, dismissal of this cause of
action does not hinder Plaintiff’s claims against Defendant for violations of Cal.
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Penal Code § 319; California’s Unfair Competition Law (“UCL”), Cal. Bus. &
Prof. Code §§ 17200 et seq.; and Consumers Legal Remedies Act (“CLRA”), Cal.
Civ. Code § 1750, et seq. Furthermore, in the event that Plaintiff’s requests or is
granted leave to amend, Plaintiff could instead include the same allegations under
Defendant’s violation of Cal. Penal Code § 319, or alternatively, add a cause of
action for Negligence as negligence per se is a theory of negligence that raises a
presumption of negligence. Ramirez v. Plough, Inc., 6 Cal.4th 539, 547 (1993).
Regardless, based on the above, Plaintiff’s other claims should survive
Defendant’s Motion.
V. ALTERNATIVE LEAVE TO AMEND
Alternatively, should this Court find any of Defendant’s arguments
persuasive, Plaintiff respectfully requests leave to amend the operative Complaint
to cure any such perceived deficiencies. As this Court is well aware, leave to
amend should be “freely given” when the plaintiff could cure the pleadings defects
and present viable claims. Fed. R. Civ. P. 15(a); see Foman v. Davis, 371 U.S.
178, 182 (1962).
VI. CONCLUSION
For the foregoing reasons, Plaintiff’s Complaint should not be dismissed.
Thus, Defendant’s Motion should be denied, or in the alternative, Plaintiff
respectfully requests the Court grant leave to amend to cure any deficiencies.
Dated: December 29, 2015 Respectfully submitted,
KAZEROUNI LAW GROUP, APC
By: __/s/ ABBAS KAZEROUNIAN _ ABBAS KAZEROUNIAN, ESQ.
MOHAMMAD KAZEROUNI, ESQ. MONA AMINI, ESQ. ATTORNEYS FOR PLAINTIFF
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[ADDITIONAL PLAINTIFF’S COUNSEL] HYDE & SWIGART Joshua B. Swigart, Esq. (SBN: 225557) [email protected] 2221 Camino Del Rio South, Suite 101 San Diego, CA 92108-3551 Telephone: (619) 233-7770 Facsimile: (619) 297-1022
Jeffrey M. Gottlieb, Esq. (JG-7905) * Dana L. Gottlieb, Esq. (DG-6151) * Gottlieb & Associates 150 East 18th Street Suite PHR New York, NY 10003 [email protected] [email protected] *Pro hac vice to be filed
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