Carr vs. NAFC: Plaintiff's Opposition To Motion To Dismiss

Case 2:14-cv-08761-JFW-JC Document 19 Filed 12/15/14 Page 1 of 25 Page ID #:278
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SCHEPER KIM & HARRIS LLP

DAVID C. SCHEPER (State Bar No. 120174)
dscheper@scheperkim.com
WILLIAM H. FORMAN (State Bar No. 150477)
wforman@scheperkim.com
601 West Fifth Street, 12th Floor
Los Angeles, CA 90071-2025
Telephone: (213) 613-4655
Facsimile: (213) 613-4656
Attorneys for Plaintiff
Clark Carr on his own behalf and on behalf
of a class of similarly situated persons
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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION
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CLARK CARR, on his own behalf

and on behalf of a class of similarly
situated persons,
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Plaintiff,
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vs.
Case No. 2:14 cv 8761-JFW-JCx

PLAINTIFFS CONSOLIDATED
OPPOSITION TO DEFENDANTS
MOTIONS TO DISMISS
JUDGE: Hon. John. F. Walter
NATIONAL ASSOCIATION OF
FORENSIC COUNSELORS, INC.,
a Nevada Corporation; NATIONAL
ASSOCIATION OF FORENSIC
COUNSELORS; AMERICAN
ACADEMY OF CERTIFIED
FORENSIC COUNSELORS, INC.
dba AMERICAN COLLEGE OF
CERTIFIED FORENSIC
COUNSELORS; a Nevada
Corporation, KARLA DEISLER
TAYLOR; FRANCIS DEISLER,
aka FRANK JOHN PALANI; and
DOES 1-10,
Hearing Date: January 5, 2014

Time:
1:30 p.m.
Courtroom: 16
Defendants.
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CONSOLIDATED OPPOSITION TO MOTIONS TO DISMISS
TABLE OF CONTENTS
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MEMORANDUM OF POINTS AND AUTHORITIES........................................... 1
I.
INTRODUCTION............................................................................................ 1
II.
FACTUAL AND PROCEDURAL BACKGROUND ................................... 2
A.
Substantive Allegations Against Defendants ...................................... 2
B.
Allegations from the So-Called Related Case in

Oklahoma............................................................................................. 4
C.
Jurisdictional Allegations Against the Individual Defendants ............ 5
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III.
DEFENDANTS MOTIONS TO DISMISS LACK MERIT.......................... 6

A.
Overview of Defendants Motions and Summary of

Argument .............................................................................................. 6
B.
Specific Jurisdiction Exists Over All Defendants ................................ 7
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1. The Individual Defendants Are Guiding Spirits, and

Therefore Subject to Personal Jurisdiction..................................... 8
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2. The Standard Schwarzenegger Formulation Also

Supports a Finding of Personal Jurisdiction................................. 9
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C.
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1. The Claims in this Case Are Completely Unrelated to

the Oklahoma Action................................................................... 12
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2. Neither the Individual Defendants nor the Class Could

be Joined to the Oklahoma Action ............................................. 15
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D.
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The Complaint Adequately States Claims Against All

Defendants ........................................................................................ 17
1. Legal Standards Under Rule 12(b)(6) ........................................ 17
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This Complaint Is Not a Compulsory Counterclaim ......................... 11
2. Legal Standards Under Rule 9(b).............................................. 19

IV.
CONCLUSION ............................................................................................. 20
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i
TABLE OF AUTHORITIES
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FEDERAL CASES
Allstar Mktg. Grp., LLC v. Your Store Online, LLC,

666 F. Supp. 2d 1109 (C.D. Cal. 2009)....................................................... 8, 9
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PAGE(S)
Ashcroft v. Iqbal,
556 U.S. 662 (2009) ...................................................................................... 17
Balistreri v. Pacifica Police Dep't,
901 F.2d 696 (9th Cir. 1990) ......................................................................... 17
Bancroft & Masters, Inc. v. Augusta Nat. Inc.,
223 F.3d 1082 (9th Cir. 2000) ....................................................................... 10
Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007) ....................................................................................... 17
Berrey v. Asarco Inc.,
439 F.3d 636 (10th Cir. 2006) ....................................................................... 15
Chloe SAS v. Sawabeh Info. Servs. Co.,
2012 WL 7679386, at *20 (C.D. Cal. May 3, 2012)....................................... 8
Colt Studio, Inc. v. Badpuppy Enter.,
75 F. Supp. 2d 1104, 1110 (C.D. Cal. 1999)...........................................10, 11
Davis v. Metro Prods., Inc.,
885 F.2d 515 n.10 (9th Cir. 1989) ................................................................... 8
Dawavendewa v. Salt River Project Agr. Imp. & Power Dist.,
276 F.3d 1150, 1155 (9th Cir. 2002) ............................................................. 16
F.D.I.C. v. Hulsey,
22 F.3d 1472 (10th Cir. 1994) ....................................................................... 15
Figi Graphics, Inc. v. Dollar General Corp.,
33 F.Supp. 2d 1263, 1268 (S.D. Cal. 1998) ............................................10, 11
IO Grp., Inc. v. Pivotal, Inc.,
2004 WL 838164, at *5 (N.D. Cal. Apr. 19, 2004)....................................... 10
Lake v. Lake,
817 F.2d 1416 (9th Cir. 1987) ......................................................................... 7
Mattel, Inc. v. MGA Entm't, Inc.,
705 F.3d 1108 (9th Cir. 2013) ...........................................................12, 13, 14
Miscellaneous Serv. Workers, Drivers & Helpers, Teamsters Local No. 427 v.
Philco-Ford Corp.,
661 F.2d 776 (9th Cir. 1981) ...................................................................19, 20
Mitchell v. CB Richard Ellis Long Term Disability Plan,
611 F.3d 1192 (9th Cir. 2010) ....................................................................... 12
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Pac. Atl. Trading Co. v. M/V Main Exp.,

758 F.2d 1325 (9th Cir. 1985) ....................................................................... 11
Panavision Int'l, L.P. v. Toeppen,
141 F.3d 1316 (9th Cir. 1998) ....................................................................... 10
Rubke v. Capitol Bancorp Ltd.,
551 F.3d 1156 (9th Cir. 2009) ....................................................................... 19
Schwarzenegger v. Fred Martin Motor Co.,
374 F.3d 797 (9th Cir. 2004) ...................................................................7, 8, 9
Semegen v. Weidner,
780 F.2d 727 (9th Cir. 1985) ......................................................................... 19
Sher v. Johnson,
911 F.2d 1357 (9th Cir. 1990) ......................................................................... 8
Yahoo! Inc. v. La Lingue Contre Le Racisme et LAntisemitisme,
433 F.3d 1199 (9th Cir.2006) .......................................................................... 7
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Ziegler v. Indian River County,

64 F.3d 470 (9th Cir.1995) ........................................................................... 11
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STATE CASES
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Korea Supply Co. v. Lockheed Martin Corp.,

29 Cal. 4th 1134 (2003)................................................................................. 17
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Lazar v. Superior Court,

12 Cal. 4th 631 (1996).................................................................................... 18
People v. Forest E. Olson, Inc.,
137 Cal. App. 3d 137 (1982) ......................................................................... 18
Robinson Helicopter Co. v. Dana Corp.,
34 Cal. 4th 979 (2004).................................................................................. 18
Tucker v. Pac. Bell Mobile Servs.,
208 Cal. App. 4th 201 (2012)....................................................................... 18
STATUTES
28 U.S.C. 1391...................................................................................................... 16
Cal. Bus. & Prof. Code 17200 .......................................................................passim
Cal. Bus. & Prof. Code 17500 .......................................................................... 3, 18
Fed. R. Civ. P. 13(a) ................................................................................................ 12
Fed. R. Civ. P. 13(a)(1)............................................................................................ 12
Fed. R. Civ. P. 13(a)(1)(A)...................................................................................... 15
Fed. R. Civ. P. 13(a)(1)(B) ...................................................................................... 15
Fed. R. Civ. P. 19..................................................................................................... 16
Fed. R. Civ. P. 9(b) ...........................................................................................passim
Federal Practice & Procedure 1410 ...................................................................... 14
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TREATISES
6 Charles A. Wright & Arthur R. Miller,

Federal Practice & Procedure 1410, at 52 (3d ed. 2010) ..................................... 14
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MEMORANDUM OF POINTS AND AUTHORITIES1
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I.
INTRODUCTION
Defendants have opted for the shotgun approach in their misguided
attempts to get this action dismissed. They veer from personal jurisdiction
objections, to murmurings about Rules 12(b)(6) and 9(b), to a novel theory of
compulsory counterclaim class actions. But while they purport to provide a
thorough analysis of each of these issues, they have actually taken great pains to
conceal every single piece of information pertinent to the arguments they raise.
At its core, this case is simple. Defendants purport to certify alcohol and
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other drug rehabilitation counselors in California, even though state law
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expressly prohibits them from doing so. For years, Defendants also made false
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statements on their website about the purported value and effect of their
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certificationsstatements which are included in detail in the Complaint but
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which Defendants completely ignore in their motions. By charging for their
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bogus certifications, Defendants have been able to prey upon hundreds of
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unwitting customers. Plaintiffa counselor who paid several years worth of
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fees to Defendantstherefore filed this class action in a California state court,
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seeking to recoup the money lost to Defendants deception and to enjoin them
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from defrauding others.
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This action should be remanded to state courtand Plaintiff has filed a
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motion seeking such reliefbut in the meantime, the Complaint is more than
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sufficient to withstand a motion to dismiss. Defendants primary arguments fail,
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for the following reasons.
First, all Parties have directed their actions to
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Defendants have filed two motions to dismiss this case. Because many
of the arguments are related, both motions are addressed in this single,
consolidated opposition.
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California, giving rise to specific personal jurisdiction. Second, Defendants
belief that this class action should have been filed as a compulsory counterclaim
runs counter to the law of joinder. Finally, Defendants attempt to attack the
claims on the merits by vaguely asserting that the Complaint lacks specificity,
but this attempt does not engage the actual allegations of the Complaint. Those
allegations specifically and plainly show how Defendants are bilking California
residents by selling them certifications that Defendants are prohibited by law
from issuing.
The Court should reject Defendants efforts to recast this Complaint as
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something it is not. This action is the only workable vehicle for pursuing
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Defendants, and it should be permitted to continuein state court.
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II.
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FACTUAL AND PROCEDURAL BACKGROUND

A. Substantive Allegations Against Defendants
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Plaintiff Clark Carr (Carr) filed this California class action against: (1)
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the National Association of Forensic Counselors, Inc. (NAFC); (2) the
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American Academy of Certified Forensic Counselors, Inc., d/b/a American
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College of Certified Forensic Counselors (ACCFC); (3) Karla Deisler Taylor
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(Taylor); and (4) Francis Deisler (Deisler) (collectively, Defendants).
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(Docket No. 1
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Individual Defendants) are married, and together they control NAFC and
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ACCFC (the Company Defendants). (Compl. at 13.)
at Ex. 1 (Compl.).)
Defendants Taylor and Deisler (the
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Defendants purport to certify persons working as alcohol and other drug
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(AOD) counselors. As part of this certification process, Defendants collect
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membership fees from AOD counselors in California. (Id. at 1, 21.) But
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Defendants certification is a fraud. Since April 1, 2005, only organizations
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specifically approved by the California Department of Alcohol and Drug
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Programs (and its successor, the Department of Health Care Services) have been
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permitted to register or certify AOD counselors in California. (Id. at 1, 19)

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(citing 9 CCR 13035.) But the Department never authorized any of Defendants
to certify AOD counselors in Californiaa fact that Defendants hid from class
members. (Id. at 12, 19.)
Although Defendants purport to include a comprehensive factual summary
of the Complaint in their motions, they in fact ignore every allegation relating to
their false statements.
authorization to issue certifications, Defendants NAFC, Taylor, and Deisler
caused representations to be made . . . that NAFC would issue [California-
recognized certifications] in return for membership and renewal fees. (Id. at
Those facts are as follows.
Despite their lack of
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18.)
And [s]ince 2004, Defendants have falsely advertised on the NAFC
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website and in other publications that (a) the certified practitioner from the
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NAFC and ACCFC qualifies as an expert witness under the Federal Rules of
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Evidence; and (b) that membership benefits include national credential &
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recognition. (Id. at 20 (quoting NAFCs website); see also id. at 23, 24
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(noting that Defendants falsely represented that their credential was a national
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certification and would qualify recipients to testify as experts in official
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proceedings).) Likewise, Defendants misrepresented to Plaintiffs and to the
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Class that the CCDC certification would permit the possessor to lawfully
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perform drug and alcohol rehabilitation counseling in the state of California.
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(Id. at 22.) Based on this series of lies, Plaintiff and other class members were
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tricked into paying fees for bogus certificates. (Id. at 21.)
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The class members each paid $90 per year for their worthless California
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certifications. (Id.) On this basis, Plaintiff has brought claims for common
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law fraud, false advertising (Cal. Bus. & Prof. Code 17500), and unfair
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competition (Cal. Bus. & Prof. Code 17200). (Id. at 32 42.) He seeks to
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recover certification fees on behalf of each of the hundreds of persons who
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have paid these fees to Defendants. (Id. at 27, 34.)
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B. Allegations from the So-Called Related Case in Oklahoma
As part of their attempt to sow confusion, Defendants try to link this action
(the California Class Action) to a pending case in the Eastern District of
Oklahoma (the Oklahoma Action). (Docket No. 2 at Ex. 2 (Okla. Compl.).)
The Oklahoma Action stems from conduct that has nothing to do with the claims
before this Court.
In the Oklahoma Action, NAFC and ACCFC sued 82 separate defendants
for trademark violations. (Id.) Each of those 82 defendants allegedly used
NAFCs registered mark without its permissionin essence, used an NAFC
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mark to indicate that they were certified by NAFC when they were not so
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certified. (Id. at 261.) NAFC and ACCFC expressly limited their case to
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violations arising out of the unauthorized use of a trademark, suing only for: (1)
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federal trademark infringement, (2) common law trademark infringement, (3)
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false designation of origin, (4) violation of a right of publicity in NAFCs name,
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pursuant to an Oklahoma statute, and (5) civil conspiracy to utilize NAFCs
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Certification, Mark, and Logo . . . . (Id. at 260 296; id. at 293.)
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Clark Carr, Plaintiff here, was named as the 54th of those 82 Oklahoma
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defendants. (Id. at 3.)2 Mr. Carr has a pending motion to dismiss the complaint
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against him on the grounds that Oklahoma lacks jurisdiction over him. (NAFC,
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Inc., v. Narconon Intl, Inc., No. 6:14-CV-00187-RAW (E.D. Okla.) Docket No.
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291.) And throughout the forty-four page Oklahoma Complaint, a mere three
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paragraphs are devoted to him. These three paragraphs can be summarized in a
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single allegation: that Carr claimed to have a certification from NAFC when he
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Defendants misleadingly refer to the Oklahoma Action as National
Association of Forensic Counselors, Inc., et al., v. Clark Carr, et al. (Docket

No. 2, at 1.) Mr. Carr is not the lead defendant in the Oklahoma Actionhis
name does not appear until the third page of the caption. (Okla. Compl. at 3.)
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did not. (Okla. Compl. at 226 228.) NAFC and ACCFC allow that Carr had
an NAFC certification at one point, they just believe that he claimed it when he
was not supposed to do so. (Id.)
In framing their Oklahoma Complaint this way, NAFC and ACCFC have
limited the Oklahoma Action to a timeframe and set of facts that are completely
separate from the current case. The Oklahoma Action pertains to events that
took place when Carr was not certified by NAFC and ACCFC. NAFCs
supposed authority to issue certifications in California is not part of any claim of
the Oklahoma Action. By contrast, the very essence of the California Class
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Action limits it to a time period during which Carr and other class members were
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certified by NAFC. Or rather, the time period during which they were paying for
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a worthless certification.
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C. Jurisdictional Allegations Against the Individual Defendants
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Both Individual Defendants live in Indiana, while the Company
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Defendants are Nevada organizations. (Compl. at 3 6.) Defendants do not
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contest that California courts have jurisdiction over NAFC and ACCFC, but they
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contest the Individual Defendants ties to the state. (Docket No. 6 (Company
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MTD); Docket No. 16 (Individual MTD).)3
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However, as the Complaint sets forth, Defendant Taylor is the President
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and Chief Executive Officer of NAFC, and she personally direct[s],
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authoriz[es] and conspir[es] to engage in the unlawful, unfair and deceptive
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business practices alleged [in the Complaint]. (Compl. at 5.) Likewise,
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The Company MTD purports to incorporate[] by reference the
arguments of the Individual MTD. (Company MTD at 5.) But the Individual
Defendants jurisdictional arguments refer specifically to Taylor and Deisler
themselves; in relying on personal descriptions, they cannot be stretched to
include businesses such as NAFC or ACCFC.
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Plaintiff alleges that Defendant Deisler manages, directs, supervises and
controls NAFC and ACCFC with Taylor. (Id. at 6.)

Together, Deisler and Taylor own, operate, and completely control
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NAFC and ACCFC.
[They] receive salaries, benefits, and other monetary
payments . . . as a result of the fraudulent and unlawful collection from Plaintiff
and the Class of certification fees. (Id. at 9.) In sum, they caused NAFC and
ACCFC to defraud California class members, and profited from that fraud.
III.
DEFENDANTS MOTIONS TO DISMISS LACK MERIT
A. Overview of Defendants Motions and Summary of Argument
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The Individual Defendants motion makes two basic arguments. It starts
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by claiming that the case against Taylor and Deisler should be dismissed for lack
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of personal jurisdiction. (Individual MTD at 5 8.) But as explained below, the
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Individual Defendants directed the Company Defendants to engage in
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misconduct in California. This direction gives rise to specific jurisdiction under
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the Ninth Circuits guiding spirit doctrine. The motion also suggests that
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Plaintiff has not met the standards of Fed. R. Civ. P. 9(b) or 12(b)(6). The
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Complaint, though, is chock-full of specific allegations.
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The Company Defendants motion incorporates all of the Individual
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Defendants arguments by reference, (Company MTD at 5), and adds one further
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wrinkle. NAFC and ACCFC believe that the present action should have been
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brought as a compulsory counterclaim against them in the Oklahoma Action.
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(Id. at 3 5.) As described more fully below, this would have been impossible.
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The California Class Action states an independent claim, not a counterclaim.
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Moreover, the rules governing joinder would prevent it from being brought as a
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counterclaim anyway: neither the Individual Defendants nor the class members
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can be made parties to the Oklahoma Action.
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Because none of Defendants arguments can survive, their motions to

dismiss should be denied.
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B. Specific Jurisdiction Exists Over All Defendants
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The Individual Defendants spend virtually all of their twelve-page motion
explaining why the Court cannot exercise general personal jurisdiction over
them. (Individual MTD at 5 8.) But as Defendants concede, a Defendant may
be subject to specific personal jurisdiction when they either purposefully
avail[] themselves of the jurisdictions laws, or purposefully direct[] their
activities toward the forum.4 Schwarzenegger v. Fred Martin Motor Co., 374
F.3d 797, 802 (9th Cir. 2004) (citing Burger King Corp. v. Rudzewicz, 471 U.S.
462, 472 73 (1985)); see also Individual MTD at 5 6.
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The Ninth Circuit has established a three-prong test for analyzing such
claims of specific jurisdiction:
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(1) The non-resident defendant must purposefully direct his
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activities or consummate some transaction with the forum or
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resident thereof . . . ;
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(2) the claim must be one which arises out of or relates to the
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defendants forum-related activities; and
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(3) the exercise of jurisdiction must comport with fair play and
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substantial justice, i.e.[,] it must be reasonable.
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Schwarzenegger, 374 F.3d at 802 (citing Lake v. Lake, 817 F.2d 1416, 1421 (9th
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Cir. 1987). The plaintiff bears the burden on the first two prongs of the test.
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Courts typically employ the purposeful availment prong in contract
cases, and the purposeful direction analysis in tort cases. Yahoo! Inc. v. La
Lingue Contre Le Racisme et LAntisemitisme, 433 F.3d 1199, 1206 (9th
Cir.2006). Because this case sounds in tortwith claims for unfair business
practices, false advertising, and fraudthis Opposition will adopt the language
of purposeful direction. However, the reasoning would be equally applicable
to a purposeful availment analysis.
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Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990). If he satisfies both
prongs, the burden shifts to the defendant to present a compelling case that the
exercise of jurisdiction would not be reasonable. Schwarzenegger, 374 F.3d at
802 (quoting Burger King, 471 U.S. at 476 78 (1985)).
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1. The Individual Defendants Are Guiding Spirits, and

Therefore Subject to Personal Jurisdiction
Schwarzenegger offers the standard formulation for evaluating specific
jurisdiction. But the Ninth Circuit has provided even more targeted guidance for
scenarios like the one now before the Court, in which a company executive
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personally direct[s] . . . [the company] to engage in the unlawful, unfair and
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deceptive business practices alleged [in the Complaint]. (Compl. at 5.) When
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considering such allegations, the Circuit has found that specific jurisdiction
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attaches to individuals if they act as a guiding spirit behind the wrongful
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conduct . . . or the central figure in the challenged corporate activity. Davis v.
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Metro Prods., Inc., 885 F.2d 515, 524 n.10 (9th Cir. 1989) (internal quotations
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and citation omitted). So long as the challenged corporate activity takes place in
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the forum state, the guiding spirit formulation encapsulates the three
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requirements laid out in Schwarzenegger, 374 F.3d at 802. See Allstar Mktg.
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Grp., LLC v. Your Store Online, LLC, 666 F. Supp. 2d 1109, 1120 (C.D. Cal.
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2009) (applying the guiding spirit analysis in the context of Schwarzeneggers
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mandate); Chloe SAS v. Sawabeh Info. Servs. Co., 2012 WL 7679386, at *20
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(C.D. Cal. May 3, 2012) (same).
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Corporate employees or officers may be deemed guiding spirits where
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they direct[], control[], ratif[y], or participate[] in the infringing activity.
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Allstar Mktg., 666 F. Supp. 2d at 1121 (finding personal jurisdiction based on the
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guiding spirit doctrine and collecting cases). The improper corporate activity in
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this case is the Company Defendants sale of worthless certifications in
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California and the dissemination of false statements about those certifications.

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(Compl. at 20 24, 33.) As alleged in the Complaint, Defendants Taylor and
Deisler directed NAFC and ACCFC to conduct this deception in California. (Id.
at 5 6.) That is, they manage[d], direct[ed], supervise[d] and control[ed]
the Company Defendants infringing activit[ies]. (Id. at 6; Allstar Mktg., 666
F. Supp. 2d at 1121.) Accordingly, the exercise of personal jurisdiction over
them is perfectly appropriate.
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2. The Standard Schwarzenegger Formulation Also Supports a

Finding of Personal Jurisdiction
Even if the guiding spirit rule were insufficient, the Schwarzenegger
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formulation can also be met as to all Defendants. Plaintiff has alleged that
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Defendantsincluding Taylor and Deisleracted together to conceal[] from
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the Class the fact that NAFC had never [been] approved . . . to register and
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certify AOD counselors. (Id. at 12.) That is to say, Defendants direct[ed
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their] activitiesselling worthless certificates, making false statements, and
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concealing their fraudulent activityto California. Schwarzenegger, 374 F.3d at
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802. And the claims against them arise[] out of this deception. Id. Thus the
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first two prongs of Schwarzeneggers three-prong test are satisfied.
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The Individual Defendants argument on these two pointsthat they are
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not residents of the State of California . . . nor do they have any bank accounts
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in Californiais a non-sequitur. (Individual MTD at 7.) The whole point of
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specific jurisdiction is that it covers defendants with few ties to the state. So
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long as a defendant directs his illicit activities toward the state, specific
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jurisdiction can apply.
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The final prong of Schwarzenegger, inquiring into reasonableness and on
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which Defendants bear the burden, considers: (1) the extent of the defendants
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purposeful interjection into the forum state, (2) the burden on the defendant in
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defending in the forum, (3) the extent of the conflict with the sovereignty of the
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defendants state, (4) the forum states interest in adjudicating the dispute, (5) the
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most efficient judicial resolution of the controversy, (6) the importance of the
forum to the plaintiffs interest in convenient and effective relief, and (7) the
existence of an alternative forum. Bancroft & Masters, Inc. v. Augusta Nat.
Inc., 223 F.3d 1082, 1088 (9th Cir. 2000). All seven factors here suggest that an
exercise of jurisdiction over Defendants would be reasonable.
First, Defendants do business in California, purporting to certify class
members in compliance with California law.
Indeed, this interjection into
[California] is the entire basis for Plaintiffs Complaint. See IO Grp., Inc. v.
Pivotal, Inc., 2004 WL 838164, at *5 (N.D. Cal. Apr. 19, 2004) (finding
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jurisdiction where Defendants made sales to California residents and entered
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into contracts with California corporations).
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Second, the burden on Defendant of appearing in California is not
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substantial. [I]n this era of fax machines and discount air travel, requiring [the
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defendant] to litigate in California is not constitutionally unreasonable.
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Panavision Intl, L.P. v. Toeppen, 141 F.3d 1316, 1323 (9th Cir. 1998). Both
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California and Indianathe Individual Defendants state of residencehave
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airports to facilitate in-person communication. For everything else, telephones
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and e-mail serve admirably.
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Third, the Individual Defendants home state has no interest in enforcing a
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California law as it applies to California class members for conduct that took
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place in California. Nor is there any indication that Indiana law conflicts with
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California law. Accordingly, there is no indication that Indiana sovereignty will
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be offended. Colt Studio, Inc. v. Badpuppy Enter., 75 F. Supp. 2d 1104, 1110
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(C.D. Cal. 1999) (where legal analysis would be the same in either state, the
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exercise of jurisdiction in California does not implicate sovereignty concerns in
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the foreign state).
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Fourth, California maintains a strong interest in protecting its citizens
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from the wrongful acts of nonresident defendants. Figi Graphics, Inc. v. Dollar
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General Corp., 33 F.Supp. 2d 1263, 1268 (S.D. Cal. 1998) (citing Ziegler v.
Indian River County, 64 F.3d 470, 475 (9th Cir.1995)).
especially strong here, where every class member is a California citizen, the
wrongful act violated California state statutes, and the statutes regulated the
provision of health services to Californians.
That interest is
Fifth, judicial efficiency would be served by allowing this case to
continue, rather than forcing Plaintiff through the procedural hoops of refiling.
Moreover, [t]he site where the injury occurred and where evidence is located
usually will be the most efficient forum. Pac. Atl. Trading Co. v. M/V Main
10
Exp., 758 F.2d 1325, 1331 (9th Cir. 1985). The injury occurred in California,
11
and at least some of the discovery will take place in California.
12
13
Sixth, California is vital to Plaintiffs convenient relief for the simple

fact that he is a California resident. Colt Studio, 75 F. Supp. 2d at 1111.
14
Seventh, there is no viable alternative forum. As discussed in more detail
15
below, Defendants have offered only the Eastern District of Oklahoma as an
16
alternate forum for this action. (Individual MTD at 8.) But the Individual
17
Defendants are Indiana, not Oklahoma citizens, and they have given no signal
18
that they will submit to personal jurisdiction in Oklahoma. Tellingly, although
19
both Individual Defendants submitted declarations in support of their motion,
20
neither states that they are amenable to being subject to jurisdiction in
21
Oklahoma.
22
Simply put, it is reasonable to hold a defendant accountable in California
23
when he specifically directs his activities toward California and endeavors to
24
violate a California law. Defendants personal jurisdiction argument should
25
therefore be rejected.
26
C. This Complaint Is Not a Compulsory Counterclaim
27
In their motion, the Company Defendants argue that this entire case should
28
be treated as a compulsory counterclaim, subordinate to the Oklahoma Action,

11
and therefore dismissed. (Company MTD at 3.)
Compulsory counterclaims are governed by Fed. R. Civ. P. 13(a). In
pertinent part, this Rule requires responsive pleadings to state any counterclaim
if the claim (A) arises out of the transaction or occurrence that is the subject
matter of the opposing partys claim; and (B) does not require adding another
party over whom the court cannot acquire jurisdiction. Fed. R. Civ. P. 13(a)(1).
[W]here a party has failed to plead a compulsory counterclaim, the claim is
waived, and subsequent complaints based on that claim should be dismissed.
Mitchell v. CB Richard Ellis Long Term Disability Plan, 611 F.3d 1192, 1201
10
(9th Cir. 2010).
11
Unfortunately for Defendants, this case does not arise out of the same
12
transaction that gave rise to the Oklahoma Action. Even worse, it includes a
13
whole host of parties over whom the Oklahoma court cannot acquire jurisdiction.
14
1. The Claims in this Case Are Completely Unrelated to the

Oklahoma Action
15
16
The Ninth Circuit applies the logical relationship test for compulsory
17
counterclaims. Mattel, Inc. v. MGA Entmt, Inc., 705 F.3d 1108, 1110 (9th Cir.
18
2013) (citation omitted). Under this test, counterclaims are compulsory only
19
when the counterclaim arises from the same aggregate set of operative facts as
20
the initial claim, in that [1] the same operative facts serve as the basis of both
21
claims or [2] the aggregate core of facts upon which the claim rests activates
22
additional legal rights otherwise dormant in the defendant. Mattel, 705 F.3d at
23
1110.
24
The Oklahoma Action alleges that a number of peopleincluding Plaintiff
25
hereused the NAFC trademark without permission.5 But the California Class
26
27
28
On this point, the Company Defendants motion is highly misleading. It
correctly notes that Plaintiff seeks relief for claims that he applied for and paid
12
Action has nothing to do with the trademark. Instead, the California Class
Action alleges (1) that Defendants violated Californias regulatory regime
governing the provision of AOD certifications, and (2) once they violated these
rules, Defendants lied to their customers.
trademark by others has nothing to do with the basis of [these] claims in the
California Class Action. Mattel, 705 F.3d at 1110.6
The use (or abuse) of NAFCs
The other prong of the logical relationship test is even less applicable.
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
(continued)
membership fees to the [Company] Defendants for the receipt of an unlawful

and worthless certification. (Company MTD at 4.) However, they go on to
grossly mischaracterize the claims of the Oklahoma Action by asserting that it
is the very same certification that is the subject of the [Oklahoma Action]. (Id.)
(emphasis added.)
This characterization turns the allegations of the Oklahoma Action on its
head. The crux of the allegations is that Mr. Carr and other defendants in the
Action violate NAFCs mark by holding themselves out as NAFC-certified
because they supposedly lack such certification. (Docket No. 2, Exhibit 2 at
226-228.)
NAFC and ACCFC appear to be arguing that the absence of a
certification thus somehow involves the very same certification at issue here
a nonsensical proposition.
6
Mattel is especially informative because it shows just how closely related
two cases can be without one becoming a compulsory counterclaim. Both sides
claimed they stole each others trade secrets, through a variety of similar
methods. 705 F.3d at 1110. But this was not sufficient to establish a compulsory
counterclaim: none of the thefts were dependent upon another, and each of the
thefts occurred at a different time.
28
13
Whether or not Plaintiff violated NAFCs trademark, Defendants violated a
California law9 CCR 13035. Once this happened, and once Defendants
tricked Plaintiff and other class members into purchasing worthless AOD
certifications, the class members had a right of action completely independent of
NAFCs trademark.
Oklahoma Action restspertaining to the unauthorized use of NAFCs mark
has nothing to do with Defendants violation of California law and the liability
that ensues from that. Mattel, 705 F.3d at 1110. Similarly, the allegations in the
Oklahoma action do not activate any additional legal rights Plaintiff or class
10
members have. Id. The California Class Action would exist even if NAFC had
11
no trademark case whatsoever.
That is, the aggregate core of facts upon which the
12
[E]ven the most liberal construction of [transaction] cannot operate to
13
make a counterclaim that arises out of an entirely different or independent
14
transaction or occurrence compulsory under Rule 13(a). Id. (citing 6 Charles A.
15
Wright & Arthur R. Miller, Federal Practice & Procedure 1410, at 52 (3d ed.
16
2010)) (emendations in original). The Oklahoma Action deals exclusively with
17
trademark infringement, while the California Class Action deals with an
18
unrelated violation of the California Code of Regulations. The Oklahoma Action
19
governs only the time during which people did not have AOD certifications
20
issued by NAFC. The California Class Action governs the time during which
21
people had certifications issued by NAFC.
22
Defendants compulsory counterclaim argument would be rejected by the
23
court in the Oklahoma Action too. The Tenth Circuit applies a similar, but even
24
more exacting, test: A counterclaim is compulsory if: (1) the issues of fact and
25
law raised by the principal claim and the counterclaim are largely the same; (2)
26
res judicata [i.e., claim preclusion] would bar a subsequent suit on defendants
27
claim; (3) the same evidence supports or refutes the principal claim and the
28
counterclaim; and, (4) there is a logical relationship between the claim and
14
counterclaim.
Berrey v. Asarco Inc., 439 F.3d 636, 645 (10th Cir. 2006)
(emendation in original, emphasis added) (quoting F.D.I.C. v. Hulsey, 22 F.3d
1472, 1487 (10th Cir. 1994)).

This formulation adds a rather substantial limit to the borders of
4
5
compulsory counterclaims as conceived by the Ninth Circuit.
In the Tenth
Circuit, a counterclaim is only compulsory if the same evidence supports or
refutes the principal claim and the counterclaim. Berrey, 439 F.3d at 645. But
no anticipated evidence for either case has been described in the Company
Defendants motion. Nor could any evidence possibly link these two cases. One
10
case has to do with the use of a specific trademark, while the other relates to
11
compliance with a regulation on professional licensing.
12
Defendants failed to describe either the Ninth Circuit standard or the Tenth
13
Circuit standard in any detail, and they certainly failed to meet them. The facts
14
underlying these two actions have nothing to do with one another, and Fed. R.
15
Civ. P. 13(a)(1)(A) is therefore inapplicable.
16
Finally, Defendants completely ignore the fact that Mr. Carr has a
17
pending, fully-briefed motion to dismiss the Oklahoma Action on the grounds
18
that Oklahoma lacks jurisdiction over him. Supra, at 4.
19
considering transferring this action to Oklahoma, the prudent course would be to
20
wait until the Oklahoma court determines whether it has jurisdiction over Mr.
21
Carr.
22
23
If this Court is even
2. Neither the Individual Defendants nor the Class Could be

Joined to the Oklahoma Action
24
In addition to the criteria described above, counterclaims are compulsory
25
only if they can be made without adding another party over whom the [first]
26
court cannot acquire jurisdiction. Fed. R. Civ. P. 13(a)(1)(B). But neither the
27
class membersas citizens of Californianor the Individual Defendantsas
28
citizens of Indianaare amenable to personal jurisdiction in Oklahoma. Thus,

15
the relevant issue is whether this case be maintained without them. It cannot.
Any class action would surely be incomplete without its class members
i.e., the plaintiffs in this case. It goes without saying that they are necessary
parties pursuant to Fed. R. Civ. P. 19 (parties are necessary if complete relief
can[not] be accorded in their absence). But the California Class Action would
also be incomplete without the Individual Defendants.
Defendants believe that the Individual Defendants have [no] particular
interest in the outcome of this lawsuit separate and apart from their alleged
ownership interest in the [Company] Defendants. (Company MTD at 5.) But
10
this assertion completely ignores substantial portions of the Complaint. Plaintiff
11
seeks injunctive relief to prevent Defendants from perpetrating similar
12
certification frauds in the future. (Compl. at 13.) Since Defendants Taylor and
13
Deisler directed the entire fraud at issue, (id. at 5 6), the requested injunctive
14
relief would only mean something if they remain a part of this action. See
15
Dawavendewa v. Salt River Project Agr. Imp. & Power Dist., 276 F.3d 1150,
16
1155 (9th Cir. 2002) (citing Fed. R. Civ. P. 19).7
17
Accordingly, because the class members and the Individual Defendants
18
are necessary parties, the claims in the California Action cannot be joined to
19
those in the Oklahoma Action.
20
21
22
23
24
25
26
27
28
Relatedly, the Eastern District of Oklahoma would be an entirely
improper venue for this class action. None of the events transpired in Oklahoma,
and none of the Parties, not even Defendants, are citizens of Oklahoma. See 28
U.S.C. 1391 (A civil action may be brought in . . . (1) a judicial district in
which any defendant resides . . . ; [or] (2) a judicial district in which a substantial
part of the events or omissions giving rise to the claim occurred).
16
1
2
D. The
Complaint
Adequately
States
Claims
Against
All
Defendants
Finally, Defendants have attacked the sufficiency of Plaintiffs complaint
pursuant to Fed. R. Civ. P. 9(b) and 12(b)(6). They do not specify which
elements of Plaintiffs causes of action are missingsaying instead,
categorically, that the Complaint lacks specificitybut Plaintiff will briefly
address these arguments.
1. Legal Standards Under Rule 12(b)(6)
Dismissal under Rule 12(b)(6) is proper where a complaint lacks either a
10
cognizable legal theory or sufficient facts to support a cognizable legal theory.
11
See, e.g., Balistreri v. Pacifica Police Dept, 901 F.2d 696, 699 (9th Cir. 1990).
12
To survive a motion to dismiss, a complaint must contain sufficient factual
13
matter, accepted as true, to state a claim to relief that is plausible on its face.
14
Ashcroft v. Iqbal, 556 U.S. 662, 668 (2009) (quoting Bell Atl. Corp. v. Twombly,
15
550 U.S. 544, 570 (2007)).
16
Plaintiff here has pled three claim[s] to relief. Iqbal, 556 U.S. at 668.
17
The first arises under Cal. Bus. & Prof. Code 17200 (the UCL), which
18
prohibits . . . unlawful, unfair, and fraudulent business acts. Korea Supply Co.
19
v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1143 (2003). The UCL borrows
20
violations from other laws by making them independently actionable as unfair
21
competitive practices. Id.
22
Defendants actions here were both unlawful and fraudulent.
As the
23
Complaint alleges, [i]n violation of 9 CCR 13035(a), NAFC issued worthless
24
certifications to Plaintiff and the Class . . . .
25
Defendants misrepresented that the [] certification possessed substantial value.
26
(Id. at 33i.) The first allegation satisfies the unlawful prong, while the second
27
speaks to the fraudulent aspect of Defendants conduct. See Korea Supply, 29
28
Cal. 4th at 1159 (an act is unlawful if it is proscribed by some constitutional,
(Compl. at 33b.)
17
Then,
statutory, regulatory, common law, or other determinable legal standard);
Tucker v. Pac. Bell Mobile Servs., 208 Cal. App. 4th 201, 225 (2012) (A
fraudulent business practice is one in which members of the public are likely to
be deceived.).
Plaintiffs second claim is for false advertising under Cal. Bus. & Prof.
Code 17500 (the FAL). The FAL prohibits any advertising which is
untrue or misleading, and which is known, or which by exercise of reasonable
care should be known, to be untrue or misleading. People v. Forest E. Olson,
Inc., 137 Cal. App. 3d 137, 139 (1982) (quoting Cal. Bus. & Prof. Code
10
17500). Again, this charge is well-grounded in the Complaint. Among many
11
other things, Defendants advertised that their certifications possessed
12
substantial value, and qualified the possessor to act as an expert witness in
13
civil or criminal litigation.
14
representations was true. (Id.)
(Compl. at 37d, f.)
Neither of these
15
Finally, Plaintiff has alleged that Defendants should be liable for fraud.
16
Under California law, the elements of fraud are: (1) a misrepresentation; (2)
17
knowledge of falsity; (3) intent to defraud; (4) justifiable reliance; and (5)
18
resulting damage. Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 979, 990
19
(2004) (citing Lazar v. Superior Court, 12 Cal. 4th 631, 638 (1996)).
20
Defendants here lied about the nature of their certifications with the intent to
21
induce Plaintiff and other Class members. (Compl. at 37 39.) Plaintiff and
22
the
23
[mis]representations, and ultimately paid money to receive worthless goods.
24
(Id. at 40 41.) Factual support for all five elements of a fraud claim can
25
therefore be found in Plaintiffs complaint.
26
27
Class
members
then
justifiably
relied
upon
Defendants
Because each of the elements of Plaintiffs three claims has been met,
Defendants Rule 12(b)(6) request should be denied.
28
18
2. Legal Standards Under Rule 9(b)
1
2
In their final effort to escape liability, Defendants have asked for dismissal
under the heightened pleading requirements of Fed. R. Civ. P. 9(b). (Individual
MTD at 10.)
Rule 9(b) applies only to claims of fraud, or claims that sound in fraud. A
plaintiff must state with particularity the circumstances constituting fraud, but
can allege generally [m]alice, intent, knowledge, and other conditions of a
persons mind. Fed. R. Civ. P. 9(b). This particularity requirement has been
interpreted to mean the pleader must state the time, place and specific content of
10
the false representations as well as the identities of the parties to the
11
misrepresentation.
12
Teamsters Local No. 427 v. PhilcoFord Corp., 661 F.2d 776, 782 (9th Cir.
13
1981). In addition, the plaintiff must set forth what is false or misleading about
14
a statement, and why it is false. Rubke v. Capitol Bancorp Ltd., 551 F.3d 1156,
15
1161 (9th Cir. 2009) (internal quotations omitted). These requirements ensure[]
16
that allegations of fraud are specific enough to give defendants notice of the
17
particular misconduct which is alleged to constitute the fraud charged so that
18
they can defend against the charge and not just deny that they have done
19
anything wrong. Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985).
Miscellaneous Serv. Workers, Drivers & Helpers,
20
The allegations concerning the content of Defendants false statement are
21
not complicated, and are spelled out in detail in the Complaint. Defendants
22
conceal[] the fact that NAFC was never approved . . . to register and certify
23
AOD counselors in the state of California. (Compl. at 12.) Specifically,
24
Defendants NAFC, Taylor, and Deisler caused representations to be made . . .
25
that NAFC would issue [California-recognized certifications] in return for
26
membership and renewal fees. (Id. at 18.) They also falsely represented that
27
the certified practitioner from the NAFC and ACCFC qualifies as an expert
28
witness under the Federal Rules of Evidence. (Id. at 20.) They further
19
claimedagain falselythat their certification would permit the possessor to
lawfully perform drug and alcohol rehabilitation counseling in California. (Id. at
22.)
As for time and place, these representations have been made [s]ince 2004
. . . on the NAFC website. (Id. at 20.) Accordingly, Plaintiff has adequately
pled time (since 2004), place (on NAFCs website), and specific content
(misrepresentations concerning the nature of certifications), as well as the
parties to the misrepresentation (NAFC, ACCFC, Taylor, and Deisler).
PhilcoFord, 661 F.2d at 782.
10
11
IV.
CONCLUSION
Defendants motions rely on misdirection.
They suggest that the
12
Complaint lacks specific information, when nothing could be farther from the
13
truth. And they suggest that the Individual Defendants are entirely removed
14
from this case, when they are actually integral to Plaintiffs Complaint.
15
Dismissal for any of the reasons presented by Defendants would ignore the clear
16
weight of authority.
17
motions to dismiss be denied.
Plaintiff therefore respectfully asks that the pending
18
19
20
DATED: December 15, 2014
SCHEPER KIM & HARRIS LLP

DAVID C. SCHEPER
WILLIAM H. FORMAN
21
22
23
24
25
By: /s/ David C. Scheper

David C. Scheper
Attorneys for Plaintiff Clark Carr on his
own behalf and on behalf of a class of
similarly situated persons
26
27
28
20

Carr vs. NAFC: Plaintiff's Opposition To Motion To Dismiss

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Case 2:14-cv-08761-JFW-JC Document 19 Filed 12/15/14 Page 1 of 25 Page ID #:278

SCHEPER KIM & HARRIS LLP

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION

CLARK CARR, on his own behalf

Case No. 2:14 cv 8761-JFW-JCx

Hearing Date: January 5, 2014

Case 2:14-cv-08761-JFW-JC Document 19 Filed 12/15/14 Page 2 of 25 Page ID #:279

MEMORANDUM OF POINTS AND AUTHORITIES........................................... 1

FACTUAL AND PROCEDURAL BACKGROUND ................................... 2

Substantive Allegations Against Defendants ...................................... 2

Allegations from the So-Called Related Case in

Jurisdictional Allegations Against the Individual Defendants ............ 5

DEFENDANTS MOTIONS TO DISMISS LACK MERIT.......................... 6

Overview of Defendants Motions and Summary of

Specific Jurisdiction Exists Over All Defendants ................................ 7

1. The Individual Defendants Are Guiding Spirits, and

2. The Standard Schwarzenegger Formulation Also

1. The Claims in this Case Are Completely Unrelated to

2. Neither the Individual Defendants nor the Class Could

The Complaint Adequately States Claims Against All

This Complaint Is Not a Compulsory Counterclaim ......................... 11

2. Legal Standards Under Rule 9(b).............................................. 19

Case 2:14-cv-08761-JFW-JC Document 19 Filed 12/15/14 Page 3 of 25 Page ID #:280

Allstar Mktg. Grp., LLC v. Your Store Online, LLC,

Case 2:14-cv-08761-JFW-JC Document 19 Filed 12/15/14 Page 4 of 25 Page ID #:281

Pac. Atl. Trading Co. v. M/V Main Exp.,

Ziegler v. Indian River County,

Korea Supply Co. v. Lockheed Martin Corp.,

Lazar v. Superior Court,

Case 2:14-cv-08761-JFW-JC Document 19 Filed 12/15/14 Page 5 of 25 Page ID #:282

6 Charles A. Wright & Arthur R. Miller,

Case 2:14-cv-08761-JFW-JC Document 19 Filed 12/15/14 Page 6 of 25 Page ID #:283

MEMORANDUM OF POINTS AND AUTHORITIES1

Defendants have opted for the shotgun approach in their misguided

objections, to murmurings about Rules 12(b)(6) and 9(b), to a novel theory of

compulsory counterclaim class actions. But while they purport to provide a

other drug rehabilitation counselors in California, even though state law

certificationsstatements which are included in detail in the Complaint but

which Defendants completely ignore in their motions. By charging for their

bogus certifications, Defendants have been able to prey upon hundreds of

unwitting customers. Plaintiffa counselor who paid several years worth of

fees to Defendantstherefore filed this class action in a California state court,

from defrauding others.

This action should be remanded to state courtand Plaintiff has filed a

sufficient to withstand a motion to dismiss. Defendants primary arguments fail,

for the following reasons.

First, all Parties have directed their actions to

Case 2:14-cv-08761-JFW-JC Document 19 Filed 12/15/14 Page 7 of 25 Page ID #:284

California, giving rise to specific personal jurisdiction. Second, Defendants

residents by selling them certifications that Defendants are prohibited by law

The Court should reject Defendants efforts to recast this Complaint as

Defendants, and it should be permitted to continuein state court.

FACTUAL AND PROCEDURAL BACKGROUND

the National Association of Forensic Counselors, Inc. (NAFC); (2) the

American Academy of Certified Forensic Counselors, Inc., d/b/a American

College of Certified Forensic Counselors (ACCFC); (3) Karla Deisler Taylor

(Taylor); and (4) Francis Deisler (Deisler) (collectively, Defendants).