Life After Hate, Inc. v. Free Radicals Project, Inc.

LIFE AFTER HATE, INC., a/k/a EXIT USA, Plaintiff/Counter-Defendant, v. FREE RADICALS PROJECT, INC., and CHRISTIAN PICCIOLINI, Defendants/Counter-Plaintiffs.

CHRISTIAN PICCIOLINI, Third-Party Plaintiff, v. TONY MCALEER, SAMMY RANGEL, ANGELA KING and FRANK MEEINK, Third-Party Defendants.

No. 18 C 6967

United States District Court for the Northern District of Illinois

April 16, 2020

Hon. Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Plaintiff Life After Hate, Inc. ("LAH") brought this suit against Defendants Christian Picciolini and Free Radicals Project, Inc. ("FRP") (together "the Picciolini Defendants"). LAH states in its First Amended Complaint that one of LAH's co-founders, Picciolini, left LAH and started the competing organization Free Radicals Project and began to infringe upon LAH's registered trademarks. (Dkt. 23). LAH brings claims against Picciolini and FRP for trademark infringement and counterfeiting, tortious interference with a business expectancy, deceptive trade and business practices, cybersquatting, conversion, unjust enrichment, and breach of fiduciary duty. (Id.). LAH moved for a preliminary injunction to prevent Picciolini and FRP from using LAH's trademarks, which was entered on September 30, 2019. (Dkt. 137). Picciolini and FRP answered LAH's complaint and brought counterclaims against LAH and four individual third-party defendants who are affiliated with LAH, Tony McAleer, Sammy Rangel, Angela King, and Frank Meeink, for a variety of claims. (Dkt. 35). LAH and the third-party defendants then moved to dismiss Picciolini and FRP's claims in their entirety. (Dkt. 92). The Court granted the motion to dismiss in part and denied it in part. (Dkt. 121).

Picciolini and FRP then filed an Amended Counter-Complaint ("ACC") against LAH and third-party defendants Tony McAleer, Sammy Rangel, Angela King, and Frank Meeink. (Dkt. 128). The ACC alleges copyright infringement, violation of right of publicity, unfair competition, unjust enrichment, and deceptive trade practices against LAH; claims against LAH, McAleer, Rangel, King and Meeink for tortious interference with a business expectancy and conspiracy; and claims against LAH, McAleer, Rangel, and Meeink for defamation/disparagement. (Dkt. 128).¹

LAH and the third-party defendants (which the Court will jointly refer to here as "LAH") now move to dismiss Counts II, III, IV, VI, VII, part of VIII, and IX of Picciolini and FRP's ACC, arguing that all claims fail to state a claim for relief under Federal Rules of Civil Procedure 12(b)(6) and 9(b), and that Count IV, VI, and IX are preempted by the Copyright Act. (Dkt. 142).

BACKGROUND

This Court accepts the complaint's well-pleaded factual allegations, with all reasonable inferences drawn in the non-moving party's favor, but not its legal conclusions. See Smoke Shop, LLC v. United States, 761 F.3d 779, 785 (7th Cir. 2014). The facts below are drawn from Picciolini and FRP's ACC (Dkt. 128) and are accepted as true. See Vinson v. Vermillion Cty., Ill., 776 F.3d 924, 925 (7th Cir. 2015). The Court assumes familiarity with the facts of this case, as the Court held a multi-day evidentiary hearing and recently provided a detailed background in Life After Hate, Inc. v. Free Radicals Project, Inc., No. 18 C 6967, 2019 WL 2644237 (N.D. Ill. June 27, 2019). Therefore, only a brief summary is needed here.

Picciolini is a former white supremacist who renounced all ties to white-supremacist groups and racism. (Dkt. 128 ¶ 13-14). In 2009, Picciolini co-created and co-founded LAH with Arno Michaelis. (Id. ¶ 17). At that time, he began using "Life After Hate" as a name for a platform and his services advocating against hate and extremist groups, in the hopes that members of those groups would renounce their ties as Picciolini and Michaelis had. (Id.). In January 2010, Picciolini and Michaelis launched the websites lifeafterhate.org and kindnessnotweakness.org to support LAH. (Id. ¶ 19). In 2011, Picciolini and Michaelis invited the four individual third-party defendants to join LAH as volunteers. (Id. ¶ 22). Three of the individuals later became members of LAH's Board. (Id.). In August 2012, Picciolini stepped downfrom his position as LAH Board Chair but remained a member of the Board. (Id. ¶ 23).

In 2014, Picciolini created, established, and used the "ExitUSA" trademark as part of the exit program he developed and operated through LAH. (Id. ¶ 30). In or about June 2014, he launched "ExitUSA" on various social media platforms. (Id. ¶ 31). As part of his efforts to develop the program, Picciolini sought to personally purchase the domain name ExitUSA.org. (Id. ¶ 32). In January 2015, Picciolini learned that someone else already owned the domain name and so he negotiated the purchase of the domain name from the original owner. (Id. ¶ 33). In March 2015, Picciolini personally redesigned LAH's website, logo, marketing materials, videos, and website content, which LAH continues to use. (Id. ¶ 35). In 2017, Picciolini redeveloped, redesigned, and relaunched the "ExitUSA" website. (Id. ¶ 42).

In April 2017, LAH members decided to separate the operations and programs of ExitUSA from LAH. (Id. ¶ 65). They agreed to establish ExitUSA as a subsidiary corporation of LAH to be operated by Picciolini, who was already overseeing and providing LAH's counseling services and programs. (Id.).

Picciolini created numerous works of authorship using his personal resources while he was associated with LAH. (Id. ¶ 50). Five of those works are federally registered copyrighted works, with the following titles: Oak Creek Video, There is life after hate Video, the Formers Video, Life After Hate Fund Raising Video (together, the "Picciolini Videos")², Life After Hate Website, and Life After Hate logo(together with the Copyrighted Videos, the "Picciolini Copyrights").³ (Id. ¶ 52). Picciolini created and produced each of the Picciolini Copyrights with his own money LAH did not employ Picciolini to create the Picciolini Copyrights. (Id. ¶¶ 53-54). Picciolini allowed LAH to use his copyrights while he was associated with LAH, but since his disassociation, LAH has not had authorization to use or publish the Picciolini Copyrights. (Id. ¶¶ 55-56).

LEGAL STANDARD

On a motion to dismiss under Rule 12(b)(6), the Court construes the complaint in the light most favorable to the plaintiff, accepts the factual allegations as true, and draws all reasonable inferences in the plaintiff's favor. Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143, 1146 (7th Cir. 2010). A complaint need contain only a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). That statement must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face, Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and raise a right to relief above the speculative level. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). However, a plaintiff's claim need only be plausible, not probable. Indep. Trust Corp. v. Stewart Info. Servs. Corp., 665 F.3d 930, 935 (7th Cir. 2012). Evaluating whether a plaintiff's claim is sufficiently plausible to survive a motion to dismiss is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." McCauley v. City of Chicago, 671 F.3d 611, 616 (7th Cir. 2011) (citing Iqbal, 556 U.S. at 678).

DISCUSSION

As in the first motion, LAH argues that some of Picciolini and FRP's claims are preempted by the Copyright Act. They additionally argue that all claims otherwise fail to state a claim for relief under Federal Rules of Civil Procedure 12(b)(6) and 9(b).

I. Copyright Act Preemption

Count I of the ACC alleges that LAH infringed Picciolini's copyrights in violation of Sections 106 and 501 of the Copyright Act, 17 U.S.C. §§ 106 and 501. (Dkt. 128 ¶¶ 73-81). LAH, in their Motion to Dismiss, argues that the Copyright Act claim preempts three claims: Count IV (Unjust Enrichment), VI (Tortious Interference with a Business Expectancy), and IX (Deceptive Trade Practices). (Dkt. 142 at 7-10).

As discussed in this Court's initial memorandum, the Copyright Act preempts state law claims if two elements are met: (1) "the work in which the right is asserted must be fixed in tangible form and come within the subject matter of the copyright as specified in § 102," and (2) the rights in the state-law claims "must be equivalent to the exclusive rights under the Copyright Act." Seng-Tiong Ho v. Taflove, 648 F.3d 489, 500-01 (7th Cir. 2011) (citing 17 U.S.C. § 301a). "To avoid preemption, a state law must regulate conduct that is qualitatively distinguishable from that governed by federal copyright law—i.e., conduct other than reproduction, adaptation, publication, performance, and display." Id. at 501 (quoting Toney v. L'Oreal USA, Inc., 406 F.3d 905, 910 (7th Cir. 2011)). A state-law right is equivalent even if it requires additional elements to make out a cause of action, if those "additionalelements do not differ in kind from those necessary for copyright infringement." Carter v. Pallante, 256 F. Supp. 2d 791, 803 (N.D. Ill. 2017) (quoting Balt. Orioles, Inc. v. Major League Baseball Players Ass'n, 805 F.2d 663, 677 n.26 (7th Cir. 1986).

Picciolini and FRP again do not dispute that the first element is met here. They argue, however, that the second element is not met as to each claim at issue because each claim is based on elements qualitatively different than Copyright Infringement. (Dkt. 153 at 3-7). As before, the Court will consider whether each state law claim subject to dismissal is based on a right equivalent to those under the Copyright Act.

a. Unjust Enrichment (Count IV)

Count IV alleges unjust enrichment. Picciolini and FRP allege that LAH received contributions from donors under the mistaken belief, fostered by LAH, that Picciolini was still associated with the organization. (Dkt. 128 ¶ 109). Picciolini and FRP allege that...