Grange grudge: court orders disclaimer to resolve confusing corporate status

National Grange of the Order of Patrons of Husbandry v. California
State Grange, 2016 WL 8730678,  No. 16-201
(E.D. Cal. Sept. 23, 2016)
As relevant here, plaintiffs sued the California Guild and
Robert McFarland for false advertisement and unfair competition under the
Lanham Act, and moved for a preliminary injunction.  “The National Grange is a nonprofit fraternal
organization founded in 1867 to promote the interests of rural America and
agriculture.”  The California State
Grange was created as its California affiliate in 1873 and elected McFarland as
its leader in 2009.  After disputes
arose, the National Grange revoked the California State Grange’s membership and
the two sides disaffiliated in 2013.The disaffiliated chapter, led by
McFarland, continued as a separate entity under the California corporate
charter filed in 1946, while the National Grange chartered a new California
State Grange in 2014.
Defendants continued to represent themselves publically as
the California State Grange, but in 2015 the court granted the National Grange summary
judgment on its trademark infringement and false advertisement and unfair
competition claims. The court permanently enjoined the disaffiliated entity
from using the word “Grange,” but declined to extend that prohibition to
include similar words because the National Grange did not expressly seek such
relief in its initial complaint. Those rulings are pending on appeal in the
Ninth Circuit [ed.: where they may languish for a long time].
In April 2016, the court granted the National Grange’s
motion for post-judgment injunctive relief, ordering that the disaffiliated
entity
[R]emove the word “Grange” from all
corporate registrations and other documents filed with any federal, state, or
local government … [R]emove the word “Grange” from all public telephone and
business directory listings, on the internet or otherwise, … [Refrain] from:
(a) conducting business using the name “Grange,” …; (b) using “Grange” in any
domain name or email address …; and (c) referencing their past affiliation with
plaintiff or any other entity whose name contains the word “Grange,” including
representing themselves to be the former California State Grange; successor to
the California State Grange; or formerly known as, trading as, or doing
business as the California State Grange….
The disaffiliated entity changed its corporate name to the
“California Guild,” but continued to refer to itself as “CSG” and “[f]ormerly
the California State Grange.”
In this proceeding, the National Grange sought a lot more
relief, including a prohibition on “referencing the history and goodwill of the
California State Grange” and surrender of all physical and intellectual
property of the California State Grange (the physical property also being
subject to a California state proceeding).
Defendants “continued to advertise that ‘cities and
townships have grown up around our rural halls’; that the the [sic] Defendant’s
organization has ‘lobbyists in Sacramento and boasts a long history of
successful legislative advocacy’; that the Defendants’ organization was the
first organization to support and promote women as equal voting members’ [sic];
and that ‘[i]n these uncertain times our members find comfort and security by
returning to our roots and reaffirming principles and goals set by the founders
140 years ago.’ ” The National Grange argued that “only the California State
Grange can claim the 140 years’ [sic] of history and goodwill associated with
the organization.” The court noted that defendants apparently found a way
around the injunction “by taking credit for the California State Grange’s
history and achievements without referencing it by name.”
Without discussing Dastar,
the court stated that “[t]he Lanham Act prohibits uncredited references to
another entity’s history and achievements.” 
However, the court noted another loophole: the California Guild remains
incorporated under the same corporate papers that the California State Grange
formerly existed under.  Thus, defendants
were “technically correct when they refer to the California Guild as an organization
that has existed for ‘decades’ and around which ‘cities and townships have
grown up.’” Though the National Grange maintained that this was nonetheless
deceptive, the court found that its “hands were tied with respect to claims to
history and achievements accrued post-incorporation”  because such claims weren’t false or
misleading but true, although “claims to history and achievements accrued prior
to 1946 are undeniably false.”  The court
wasn’t ignoring reality or gamesmanship; it was recognizing that, “for some
reason, plaintiffs have not taken effective action in the three years after the
parties disaffiliated to prevent defendants from occupying the California State
Grange’s corporate charter. The court cannot step in to save plaintiffs here.”
Thus, the court would only enjoin defendants from referencing history and
achievements accrued by the California State Grange prior to its incorporation.  Irreparable injury existed because “further
uncredited references to their history may permanently dilute their brand in
California.”
The National Grange also challenged defendants’ allegedly
false claims that local chapters must ‘disaffiliate’ with the California Guild
in order to join [the California State Grange]” and that the local chapters “are
‘no longer nonprofit, must pay taxes, cannot accept tax deductible donations,
or receive various grants.’ ” But the National Grange didn’t show falsity for
those statements.  Any acts defendants
engaged in while purporting to act in the official capacity would violate the
existing order; they were allowed to solicit new guild members and officers in
their own capacity.  The court denied the
National Grange’s request to enjoin “performance of Grange rituals” as vague
and overly broad.  “While performance of
similar functions can contribute to a violation of the Lanham Act, plaintiffs’
request encompasses legitimate commercial activities such as soliciting new
members and providing services to farm communities.”
The National Grange’s request for delivery of all business
records, physical property, and intellectual property also went beyond the
false advertising claims at issue here.  There
was no evidence that defendants’ alleged use of business records and mailing
lists constituted false advertising. Using the “proprietary mailing lists of
the California State Grange … albeit under different names” to contact Grange
members with proper identification was “not, in itself, false advertisement.”
Use of website logos, images, and backgrounds that are nearly identical to the
National Grance could cause actionable confusion, but the National Grange’s
request for relief was too broad. 
The court declined to evict defendants from the buildings
alleged to belong to the California State Grange, but it did agree that, given defendants’
other deceptive tactics (referring to themselves as an organization “created in
1873,” “provid[ing] 160 years of service,” and “oldest agricultural
organization in California”), their use of the National Grange’s buildings and
former telephone numbers “would serve to further create a false impression
among the public that they are affiliated with or successors to the California
State Grange.” Eviction was a drastic measure for a preliminary
injunction;  at this stage, a further
disclaimer would suffice. However, it was reasonable to require defendants to
cease using the old phone numbers.
As for that disclaimer: though the court would allow defendants
from to claim credit for the history and achievements of the corporate entity
formerly named the California State Grange from 1946 to 2013, “unless the
public is notified that defendants are not in fact the California State Grange
there would be a strong probability of confusion.”  Thus, all communications discussing the
history or achievements of the corporate entity formerly named the California
State Grange required a prominent disclaimer: “NOT AFFILIATED WITH THE
CALIFORNIA STATE GRANGE.” Defendants were already using a mealy-mouthed
disclaimer, “not affiliated with … the Grange of the State of California’s
Patrons of Husbandry Chartered.” The National Grange argued that this name was “unknown
to the California Granges.” Without specifically ruling on that argument, the
court saw no harm in making the disclaimer clearer.

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