Butler v. Adoption Media, LLC

• Decision Date: 30 March 2007
• Docket Number: No. C 04-0135 PJH.,C 04-0135 PJH.
• Citation: 486 F.Supp.2d 1022
• Parties: Michael BUTLER, et al., Plaintiffs, v. ADOPTION MEDIA, LLC, et al., Defendants.
• Court: U.S. District Court — Northern District of California

486 F.Supp.2d 1022

Michael BUTLER, et al., Plaintiffs, v. ADOPTION MEDIA, LLC, et al., Defendants.

No. C 04-0135 PJH.

United States District Court, N.D. California.

March 30, 2007.

COPYRIGHT MATERIAL OMITTED

Courtney Grant Joslin, Katherine K. Ikeda, Orrick Herrington & Sutcliffe LLP, Paul Stephan Marchegiani, Morrison & Foerster LLP, San Francisco, CA, I. Neel Chatterjee, Theresa Ann Sutton, Orrick Herrington & Sutcliffe, Menlo Park, CA, Shannon Minter, Dominique Naomi Thomas Alschuler Grossman Stein & Kahn, Santa Monica, CA, for Plaintiffs.

Benjamin Wyman Bull, Alliance Defense Fund, Scottsdale, AZ, Terry Lee Thompson, Terry L. Thompson, Attorney at Law, Alamo, CA, Byron Jeffords Babione, Dale Schowengerdt, Glen E. Lavy, Alliance Defense Fund, Scottsdale, AZ, David L. Llewellyn, Jr., Llewellyn Spann, Attorneys at Law, Citrus Heights, CA, Douglas Carter Fitzpatrick, Sedona, AZ, J. Hector Moreno, Jr., San Jose, CA, for Defendants.

ORDER RE CROSS-MOTIONS FOR SUMMARY JUDGMENT

HAMILTON, District Judge.

The parties' cross-motions for summary judgment came on for hearing on June 7, 2006. In July 2006, the California Supreme Court issued three decisions relevant to issues raised in the parties' motions: Kearney v. Salomon Smith Barney, Inc., 39 Cal.4th 95, 45 Cal.Rptr.3d 730, 137 P.3d 914 (2006); Californians for Disability Rights v. Mervyn's, LLC, 39 Cal.4th 223, 46 Cal.Rptr.3d 57, 138 P.3d 207 (2006); and Branick v. Downey Say. & Loan Ass'n, 39 Cal.4th 235, 46 Cal.Rptr.3d 66, 138 P.3d 214 (2006). The court subsequently instructed the parties to submit further briefing addressing those decisions.

Having read the parties' papers and carefully considered their arguments and the relevant legal authority, and good cause appearing, the court hereby DENIES plaintiffs' motion and GRANTS defendants' motions IN PART and DENIES them IN PART, as follows.

INTRODUCTION

Defendants Dale R. Gwilliam and Nathan W. Gwilliam ("the Gwilliams") are Arizona residents who run businesses that operate adoption-related websites. These websites constitute the largest, most active, and most well-known Internet adoption-related business in the United States. One of the websites, ParentProfiles.com, offers a service that allows prospective adoptive parents, for a fee, to post "profiles" containing information about themselves, for review by women who have given birth or are about to give birth and plan to give up the children for adoption.

Plaintiffs Michael Butler and Richard Butler ("the Butlers") have been registered domestic partners in the state of California since 2000. In 2002, they were seeking to adopt a child. They were certified and approved to adopt in California, and applied to have their profile posted on ParentProfiles.com. Their application was rejected.

On January 12, 2004, plaintiffs filed suit against the Gwilliams and two Arizona limited liability companies owned and managed by the Gwilliams — Adoption Media LLC and Adoption Profiles LLC. Plaintiffs alleged violations of the Unruh Civil Rights Act ("the Unruh Act" or "the Act"), California Civil Code §§ 51 and 51.5; and violations of California's unfair competition and false advertising laws, California Business and Professions Code §§ 17200 and 17500. Plaintiffs subsequently amended the complaint to add three defendants — Adoption.com, True North, Inc., and Aracaju, Inc. — and to allege alter ego and successor liability. Plaintiffs amended the complaint a second time following the court's ruling on the motion to dismiss the first amended complaint. Plaintiffs seek damages and injunctive relief.

Each side has moved for summary judgment. Plaintiffs seek summary judgment on the issue of liability against Dale R. Gwilliam, Nathan W. Gwilliam, Adoption.com, and Adoption Profiles LLC, on the Unruh Act claims. Defendants seek summary judgment on the substantive causes of action and on the issues of alter ego and successor liability, and personal jurisdiction. They also argue that the injunctive relief requested would violate the First Amendment, that California substantive law may not be applied in this case, and that plaintiffs lack standing to bring the unfair competition and false advertising claims.

BACKGROUND

On August 31, 1999, Dale Gwilliam and Nathan Gwilliam formed an Arizona general partnership, known as Adoption.com. Dale and Nathan each owned, and continue to own, 50% of the Adoption.com partnership.

As of October 2002, the Adoption.com partnership owned a network of adoption-related websites, including Adoption.com, a website providing a variety of adoption-related information, and ParentProfiles.com, which allowed prospective adoptive parents to post information about themselves, for a monthly fee. In addition, in Dale and Nathan formed another general partnership in 2002, Adoption Internet Holdings, and through that partnership purchased a California business, the Adopting.org website.

Plaintiffs were certified and approved to adopt on October 3, 2002. The Independent Adoption Center ("IAC"), the oldest and largest adoption agency in California, which had a contract with the Adoption.com partnership relating to referrals to the ParentProfiles service, referred plaintiffs to the website, ParentProfiles.com, as part of plaintiffs' search for an adoptable child.

Plaintiffs filled out an application to become members of ParentProfiles.com. They obtained a log-in identification name and password to access the ParentProfiles website and upload their profile information. On October 21, 2002, plaintiffs submitted by facsimile copies of the ParentProfiles credit card authorization form and agreement and a certificate of compliance from the IAC.

On October 24, 2002, Michael Butler called Adoption.com's toll-free number to inquire about the status of the application. He spoke with Dale Gwilliam. In the course of the conversation, Dale told Michael that plaintiffs would not be permitted to use ParentProfiles.com's services.

The partnership had adopted a policy allowing only individuals in an opposite-sex marriage to post profiles on the website. Dale testified in his deposition that the "opposite gender component is an essential component of the policy." Nathan testified that a same-sex couple registered under California's domestic partnership law would not qualify under the policy because they are not married, and that even if same-sex couples were permitted to marry in all 50 states, defendants would still be reluctant to change the policy and would instead "look at all the evidence gathered altogether and make a decision" as to whether to modify their policy.

Michael e-mailed the Gwilliams five days later "confirming our conversation we had last Thursday afternoon" in which Dale "stated that it is your policy to not allow domestic partners to sign-up for your site." Michael asked that Dale "reconsider your policy against gay couples and allow us to join your site." The Gwilliams did not respond to the e-mail, and did not have any further direct communication with the plaintiffs. The partnership did not accept plaintiffs' application to use the services of ParentProfiles.com, and refused to post their profile on the website.

On January 2, 2003, the Gwilliam formed two Arizona limited liability companies, Adoption Media LLC and Adoption Profiles LLC. Each of the two LLCs was owned 50-50 by Dale and Nathan. At the formation of the LLCs, each was provided with $200 in cash assets.

On January 9, 2003, Dale and Nathan elected themselves the sole managers and officers of Adoption Media LLC and Adoption Profiles LLC. Nathan is the Chief Executive Officer, and Dale is the President and Secretary, of each LLC. Also on January 9, 2003, Dale and Nathan executed documents transferring most of the partnership assets of Adoption.com (the general partnership) to Dale and Nathan. Those assets included the Adoption.com and ParentProfiles.com domain names and related programming and intellectual property.

Dale and Nathan then transferred ownership of the Adoption.com website to Adoption Media LLC and ownership of the ParentProfiles.com website to Adoption Profiles LLC — all transfers or distributions to be effective as of 11:59:30 p.m. on January 31, 2003. The Adoption.com partnership retained the software used by the websites transferred to the LLCs, and also retained more than 1000 domain names, the operating website, the Adopting.org website, and other associated assets.

On January 15, 2003, Dale and Nathan dissolved the partnership Adoption Internet Holdings, and distributed all its assets, including the Adopting.org website, to the general partners as of 11:59:30 p.m. on January 31, 2003. Dale and Nathan transferred these assets to Adoption Media LLC as of 11:59:35 p.m. on January 31, 2003.

On June 2, 2003, Dale and his wife Kristie incorporated True North, Inc. ("True North") as an Arizona corporation; and Nathan incorporated Aracaju, Inc. ("Aracaju") as an Arizona corporation.

On June 6, 2003, Dale conveyed his 50% ownership in Adoption Media LLC and Adoption Profiles LLC to True North; and Nathan conveyed his 50% ownership in Adoption Media LLC and Adoption Profiles LLC to Aracaju. The transfers involved membership only, with no transfer of the underlying assets. That same day, Dale, as President of True North, designated himself as True North's representative relating to its membership interests in both LLCs; and Nathan as President of Aracaju, designated himself as Aracaju's representative relating to its membership interests in both LLCs. True North and Aracaju currently act as holding companies of the membership interests in the LLCs.

Adoption Profiles LLC continues the policy of allowing only married, opposite-sex couples to use the ParentProfiles service.

DISCUSSION

A. Legal Standard

Summary judgment is appropriate when there is no genuine issue as to material facts and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P....