Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_04-cv-00135/USCOURTS-cand-4_04-cv-00135-10/pdf.json

Parties Involved:
Adoption Media, LLC
Defendant
Adoption Profiles, LLC
Defendant
Adoption.com
Defendant
Aracaju, Inc.
Defendant
Michael Butler
Plaintiff
Richard Butler
Plaintiff
Dale R. Gwilliam
Defendant
Nathan W. Gwilliam
Defendant
True North, Inc.
Defendant

Document Text:

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

MICHAEL BUTLER, et al.,

Plaintiffs, No. C 04-0135 PJH

v. ORDER RE CROSS-MOTIONS 

FOR SUMMARY JUDGMENT

ADOPTION MEDIA, LLC, et al.,

Defendants.

_______________________________/

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

(2006); Californians for Disability Rights v. Mervyns, LLC, 39 Cal. 4th 223 (2006); and

Branick v. Downey Sav. & Loan Ass’n, 39 Cal. 4th 235 (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

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 1 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

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. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 2 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

As of October 2002, the Adoption.com partnership owned a network of adoptionrelated 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 samesex 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. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 3 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

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 Gwilliams 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. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 4 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

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.

AdoptionProfiles 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. 56. 

Material facts are those that might affect the outcome of the case. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is “genuine” if there

is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id.

The court may not weigh the evidence, and is required to view the evidence in the light

most favorable to the nonmoving party. Id.

A party seeking summary judgment bears the initial burden of informing the court of

the basis for its motion, and of identifying those portions of the pleadings and discovery

responses that demonstrate the absence of a genuine issue of material fact. Celotex Corp.

v. Catrett, 477 U.S. 317, 323 (1986). Where the moving party will have the burden of proof

at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other

than for the moving party. On an issue where the nonmoving party will bear the burden of

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 5 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

proof at trial, the moving party can prevail merely by pointing out to the district court that

there is an absence of evidence to support the nonmoving party’s case. See id. If the

moving party meets its initial burden, the opposing party must then set forth specific facts

showing that there is some genuine issue for trial in order to defeat the motion. See Fed.

R. Civ. P. 56(e); Anderson, 477 U.S. at 250. 

B. The Unruh Act

The Unruh Civil Rights Act, California Civil Code §§ 51 and 52, was enacted in 1959,

although predecessor statutes had been enacted in 1897 and 1905, and the 1905 statute

remained in effect until the effective date of the Unruh Act. See Harris v. Capital Growth

Investors XIV, 52 Cal. 3d 1142, 1150-52 (1991). Civil Code § 51.5 was enacted in 1976.

While it has been amended several times since 1959, Civil Code § 51 has always

provided that “[a]ll persons within the jurisdiction of this state are free and equal, and no

matter what their [specified personal characteristics], . . . are entitled to the full and equal

accommodations, advantages, facilities, privileges, or services in all business

establishments of every kind whatsoever.” Cal. Civ. Code § 51(b). Section 51.5 provides,

in part, that “[n]o business establishment of any kind whatsoever shall discriminate against,

boycott or blacklist, or refuse to buy from, contract with, sell to, or trade with any person in

this state on account of any characteristic listed or defined in subdivision (b) or (e) of

Section 51 . . . . “ Cal. Civ. Code § 51.5(a). 

The “specified personal characteristics” listed in the 1959 version of the Unruh Act

were “race, color, religion, ancestry, or national origin.” In 1970, the California Supreme

Court applied the Unruh Act to a case involving the exclusion of a patron of a business

establishment for reasons not involving the specified characteristics listed in the Act. In re

Cox, 3 Cal. 3d 205 (1970). The question was whether a shopping center had the right to

exclude a customer based only on his association with a young man who “wore long hair”

and “dressed in an unconventional manner.” 

The court examined its previous decisions in Orloff v. Los Angeles Turf Club, 36 Cal.

2d 734 (1951) and Stoumen v. Reilly, 37 Cal. 2d 713 (1951), two cases brought under the

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 6 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 The court added a qualification, however, stating that businesses subject to the Unruh

Act retained the right “to establish reasonable regulations that are rationally related to the

services performed and facilities provided.” Id. at 212, 217 & n.13.

7

Unruh Act’s predecessor statute, the Civil Rights Act, which provided that “all citizens” were

entitled to “full and equal accommodations, advantages, facilities, and privileges,” and also

prohibited “denying to any citizen, except for reasons applicable alike to every race or

color,” access to places of public accommodation. In Orloff, the court had held that the

Civil Rights Act barred the manager of a race track from ejecting a patron (a convicted

gambler) who had acquired a reputation as a man of immoral character. Orloff, 36 Cal. 2d

at 739. In Stoumen, the court had “recognized the right of homosexuals to obtain food and

drink in a bar and restaurant.” Stoumen, 37 Cal. 2d at 716. 

The California Supreme Court concluded that Orloff and Stoumen had “clearly

established” that the Civil Rights Act prohibited all arbitrary discrimination in public

accommodations. Cox, 3 Cal. 3d at 214.1

 The court also noted that the Legislature had

enacted the 1959 amendment to §§ 51 and 52 subsequent to the decisions in Orloff and

Stoumen, neither of which had restricted discrimination to race, color, religion, ancestry, or

national origin. Id. at 215. Stating that “[w]e must, of course, presume that the Legislature

was well aware of these decisions,” the court refused to “infer from the 1959 amendment

any legislative intent to deprive citizens in general of the rights declared by the statute and

stanchioned by public policy.” Id. 

Based on the nature of the 1959 amendments, the past judicial interpretation of the

Civil Rights Act, and the history of legislative enactments that extended the statutes’ scope,

the court concluded that “identification of particular bases of discrimination – color, race,

religion, ancestry, and national origin – added by the 1959 amendment, is illustrative rather

than restrictive.” Id. at 216. The court noted that while the legislation had been invoked

primarily by persons alleging discrimination on the basis of race, “its language and its

history compel the conclusion that the Legislature intended to prohibit all arbitrary

discrimination by business establishments.” Id. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 7 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

In 1974, the Legislature amended §§ 51 and 52 to add “sex” to the list of “specified

personal characteristics. The Legislature noted that section 51applied to all arbitrary

discrimination and that [t]he listing of possible bases of discrimination has no legal effect,

but is merely illustrative.” 

In 1982, in Marina Point, Ltd. v. Wolfson, 30 Cal. 3d 721 (1982), the California

Supreme Court applied Cox to hold that the owner of an apartment complex violated the

Unruh Act by refusing to rent to families with minor children. The court again rejected the

view that the Act was limited to the categories specifically enumerated. Id. at 732. The

court cited the legislative history of the Act, which reflected that in 1974, in sending the bill

amending § 51 to the Governor for his signature, the Chairman of the Select Committee on

Housing and Urban Affairs had stated that “[t]he listing of possible bases of discrimination

[in the Act] has no legal effect but is merely illustrative.” Id. at 734. The court also cited

various opinions of the California Attorney General, advising that non-enumerated

characteristics – such as occupation, marital status, or status as students or welfare

recipients – could provide a basis for an Unruh Act claim. Id. at 736. 

The following year, in O’Connor v. Village Green Owners Ass’n, 33 Cal. 3d 790

(1983), the court applied Marina Green to hold that a condominium development restricting

residency to persons over 18 violated the Unruh Act (noting also, however, that an age

limitation in a retirement community preserved for older citizens would likely not violate the

Act). Id. at 793.

In 1985, the California Supreme Court applied Cox and Marina Point to hold that the

Boys’ Club of Santa Cruz – a community recreation facility that was open (for a nominal

annual fee) to all Santa Cruz boys between the ages of 8 and 18 – discriminated against

girls in violation of the Unruh Act. Isbister v. Boys’ Club of Santa Cruz, 40 Cal. 3d 72

(1985). The court’s discussion focused primarily on the question whether the Boys’ Club

qualified as a “business establishment,” but the court did reiterate its by-now familiar

statement that “identification of particular bases of discrimination [in the Unruh Act] is

illustrative rather than restrictive.” Id. at 86-87 (quoting Marina Point, 3 Cal. 3d at 216). 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 8 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

 This ruling was subsequently reversed, on the ground that the Boy Scouts are not a

“business establishment” governed by the provisions of the Unruh Act. See Curran v. Mt.

Diablo Council of Boy Scouts of America, 17 Cal. 4th 670, 700 (1998).

9

During this same period – 1982 to 1984 – three appellate courts held that the Unruh

Act prohibits discrimination based on sexual orientation. First, in Hubert v. Williams, 133

Cal App. 3d Supp. 1 (App. Dep’t., Super. Ct, L.A. County, 1982), a quadriplegic tenant who

required 24-hour care was evicted from his apartment because he had hired a lesbian

attendant. Relying on Marina Point, Cox, and Stoumen, the court held that discrimination

on the basis of homosexuality violated the Unruh Act. Id. at 3-5.

Second, in Curran v. Mt. Diablo Council of the Boy Scouts, 147 Cal. App. 3d 712

(1983), the Court of Appeal held that the expulsion of a person from membership in the Boy

Scouts – the plaintiff was an Eagle Scout who had applied to be an adult leader – on the

basis of his homosexuality was a violation of the Unruh Act. Id. at 733-34.2 

Third, in Rolon v. Kulwitzky, 153 Cal. App. 3d 289 (1984), two lesbians filed suit

against a restaurant owner after they were refused service in a semi-private booth in the

restaurant, and were instead offered service at a table in the main dining room. The

restaurant had a policy of allowing seating in the booths only by two people of the opposite

sex. The Court of Appeal observed that while the Unruh Act “preserves the traditional

broad authority of owners and proprietors of business establishments to adopt reasonable

rules regulating the conduct of patrons or tenants,” it does not permit the exclusion of an

individual who has committed no such conduct, “solely because he falls within a class of

persons whom the owner believes is more likely to engage in misconduct than some other

group.” Id. at 292. 

In 1987, the Legislature added “blindness or other physical disability” to the list of

“specified personal characteristics.” 

In 1991, the California Supreme Court issued its decision in Harris v. Capital Growth

Investors XIV. The plaintiffs were a group of prospective tenants who sued under the

Unruh Act to challenge a landlord’s requirement that any prospective tenant have a monthly

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 9 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10

income of at least three times the apartment’s monthly rent. The two issues in the case

were whether the Act proscribes economic discrimination, and whether a plaintiff can state

a claim under the Act for disparate impact (as opposed to disparate treatment). 

The defendants asserted, based on the specific discriminatory classifications listed

in the Act, that judicial expansion of those classifications to include whatever the courts

might deem “arbitrary” could not be justified. They also argued that the court should

overrule Cox, Marina Point, and O’Connor. 

The court found some indication that the Legislature had intended to confine the

scope of the Act to certain specified types of discrimination, but also found an

“[in]sufficiently compelling reason” to overrule Cox and its progeny. Harris, 52 Cal. 3d at

1155. The court noted that while the Legislature had amended the Act several times in the

20 years since the Cox decision, it had taken no steps to overrule the cases that had found

that the Unruh Act prohibited discrimination on the basis of unconventional dress or

appearance (Cox), families with children (Marina Point), persons under 18 (O’Connor), and

homosexuality (Rolon , Curran, and Hubert). Id. 

The court reiterated that “[w]e generally presume the Legislature is aware of

appellate court decisions,” id. at 1155, and cited Marina Point for the proposition that when

the Legislature amends a statute without altering portions of the provision that have been

previously judicially construed, “the Legislature is presumed to have been aware of and to

have acquiesced in the previous judicial construction.” Id. at 1156 (citing Marina Point, 30

Cal. 3d at 734). The court found the defendants’ argument that the holdings of Cox, Marina

Point, O’Connor, and other decisions extending the Unruh Act beyond its specified

categories of discrimination had been somehow repudiated by the Legislature to be

“untenable.” Id. 

The court also concluded, however, that the Legislature’s decision to enumerate

personal characteristics in the Act, and to omit financial or economic ones, did suggest a

limitation on the scope of the statute. The court devised a three-part analysis to help

answer the question whether, in view of the continued importance of the enumerated

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 10 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11

categories, and in light of the language and history of the Act and the probable impact on

its enforcement of the competing interpretations urged by the parties, the Act could

nonetheless be extended to claims of economic status discrimination. Id. at 1159.

First, the court considered the language of the statute, noting an essential difference

between economic status (the basis for the plaintiffs’ claims) and the Act’s enumerated

categories and those added by judicial construction. The common element shared by the

enumerated categories and those added by judicial construction was that they “involve

personal as opposed to economic characteristics.” Id. at 1160. The court found no case in

which distinctions based on financial or economic status (as opposed to personal

characteristics) had been subjected to scrutiny under the Act; and found no support in the

language or history of the Act to support plaintiffs’ contention that economic distinctions and

criteria were within the scope of the Act. Id. at 1161-62. 

Second, the court asked whether a legitimate business interest justified the minimum

income policy at issue in the case, and concluded that it did. Id. at 1164. The court

observed that “[b]usiness establishments have an obvious and important interest in

obtaining full and timely payment for the goods and services they provide,” and noted that it

had previously “recognized that the Unruh Act did not prohibit businesses from making

economic distinctions among customers so long as the criteria used were not based on

personal characteristics and could conceivably be met by any customer.” Id. at 1162-63. 

The court found that the minimum income policy was “not ‘arbitrary’ in the same way that

race and sex discrimination are arbitrary.” Id. at 1164. 

Third, the court considered the potential consequences of allowing claims for

economic status discrimination to proceed under the Act, and suggested the possibility that

courts would become involved in a multitude of microeconomic decisions they are ill

prepared to make, and the possibility that landlords might abandon neutral criteria such as

income, and use subjective criteria that might promote the kind of discrimination the Unruh

Act prohibits. Id. at 1165-69.

Although Harris did not overrule Cox, Marina Point, or O’Connor, several decisions

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 11 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12

issued by the court of appeal during the post-Harris period reflected a new unwillingness to

expand the number of protected characteristics under the Unruh Act. For example, in

1991, the court in Gayer v. Polk Gulch, Inc., 231 Cal. App. 3d 515 (1991), found that the

Unruh Act did not encompass a retaliatory discrimination claim by a patron who had a

pending discrimination suit against a bar. In 1994, the court in Roth v. Rhodes, 25 Cal.

App. 4th 530 (1994), found that a podiatrist could not maintain a claim under the Unruh Act

against the operator of a medical building who refused to lease space to him. In 2001, the

court in Hessians Motorcycle Club v. J.C. Flanagans, 86 Cal. App. 4th 833 (2001), found

that the Unruh Act did not prohibit a sports bar from denying admittance to motorcycle club

members who refused to remove their “colors.” 

 In 1992, a California appellate court held that the Unruh Act should not be expanded

to include “marital status” as an additional basis of prohibited discrimination. See Beaty v.

Truck Ins. Exchange, 6 Cal. App. 4th 1455 (1992). The plaintiffs, a same-sex couple, sued

the defendant insurance company because it refused to sell them a joint umbrella policy

under the terms and conditions offered to married couples. The court acknowledged that

prior California decisions (Stoumen, Rolon, Curran, and Hubert) had held that

discrimination against individuals on the basis of sexual orientation violates the Unruh Act. 

However, the court found that the case did not involve discrimination on the basis of sexual

orientation, because the insurance company treated all unmarried individuals the same with

regard to the issuance of umbrella policies, without regard to sexual orientation. Id. at

1460-61. 

The court then considered the claim of discrimination on the basis of marital status. 

While recognizing that the Unruh Act had previously been extended to cover categories not

enumerated in the statute, the court noted that “no court has extended the Unruh Act to

claimed discrimination on the basis of marital status,” and declared that “we shall not be the

first to do so.” Id. at 1462. The court interpreted Harris as accepting that the Unruh Act

had previously been extended to unenumerated categories, but also as requiring that any

future expansion of prohibited categories should be “carefully weighed to insure a result

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 12 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

 The Legislature again amended the Unruh Act in 1992, deleting “blindness or other”

from the phrase “blindness or other disability,” and adding “or medical condition” after

“disability” in 2000. 

13

consistent with legislative intent.” Id. 

The court applied the second two prongs of Harris’ three-part analysis (legitimate

business interest and consequences of allowing the type of claim brought by plaintiffs). In

place of the first prong (examination of the language of the statute, and determination

whether the proposed basis of discrimination – marital status – was similar to either the

enumerated characteristics or the judicially-construed characteristics), the court simply

concluded that marital status, like the economic status at issue in Harris, was a

characteristic the Act was not intended to reach. 

The court found that the “strong policy in [California] in favor of marriage”

categorically precluded recognition of marital status discrimination under the Act. In the

context presented, the court found that the policy in favor of marriage would not be

furthered and, in the case of an unmarried heterosexual couple, would actually be thwarted,

by including marital status among the prohibited categories. Id. at 1462-63. The court also

observed that the Legislature had included “marital status” in scores of statutes, but had

never taken the opportunity to include it in the Unruh Act. Id. 

Thus, as of 2002, when defendants denied the Butlers’ request to post their profile

on ParentProfiles.com, the Unruh Act specifically prohibited discrimination on the basis of

race, color, religion, ancestry, national origin, sex, disability, and medical condition.3 The

California Supreme Court had repeatedly stated, however, that the enumerated categories

were “illustrative rather than restrictive,” and the Legislature had never acted to repudiate

that construction, despite having amended the Act several times in the interim. The Harris

court had slightly narrowed the earlier construction, holding that the Unruh Act did not apply

to prohibit discrimination based on “financial or economic status,” or other characteristics

falling outside the realm of “personal characteristics.” 

Also as of 2002, a number of California appellate courts had ruled that the Unruh Act

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 13 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

 In Smith v. Fair Employment & Housing Comm’n, 12 Cal. 4th 1143 (1996), the

California Supreme Court held that the Fair Employment and Housing Act, Cal. Gov’t Code §

12900, et seq., protects unmarried cohabitants from housing discrimination. The plaintiffs had

also raised an Unruh Act claim, asserting discrimination on the basis of marital status, but the

court found it unnecessary to address that claim in light of the ruling on the FEHA claim. The

court noted the conflict on the issue, citing Beaty, where the court ruled that marital status

discrimination was not actionable under the Unruh Act; and also citing Marina Point, where the

California Supreme Court had stated to the contrary in dicta, see Marina Point, 30 Cal. 3d at

736, and Frantz v. Blackwell, 189 Cal. App. 3d 91, 95 (1987) (same). Smith, 12 Cal. 4th at

1160 n.11. 

14

prohibited discrimination on the basis of sexual orientation. While at least one appellate

court had held that the Unruh Act did not prohibit discrimination on the basis of marital

status, the California Supreme Court had indicated that it was an open question,4

 and had

also repeatedly held that the Unruh Act’s list of bases of discrimination was illustrative

rather than restrictive. 

In 2004, plaintiffs filed the complaint in this action, alleging discrimination based on

marital status, sexual orientation, and sex, in violation of Civil Code §§ 51 and 51.5. 

In 2005, the California Supreme Court issued its opinion in Koebke v. Bernardo

Heights Country Club, 36 Cal. 4th 824 (2005). In that case, a same-sex couple who were

registered domestic partners sued a country club to which one of them belonged, alleging

that the club’s refusal to extend to them certain benefits it extended to married couples

constituted marital status discrimination under the Unruh Act. 

The court first summarized its prior decisions (Cox, Marina Point, O’Connor, Isbister,

and Harris), and then applied the three-part Harris analysis to plaintiffs’ marital status

discrimination claim. As an initial matter, the court found that marital status involves a

personal characteristic, like those categories already covered by the Act, and disagreed

with the defendant country club’s argument that marital status is nothing more than a legal

status imposed by the state. Koebke, 36 Cal. 4th at 842. 

The court then discussed the Beaty decision at length. The court acknowledged the

strong policy in California favoring marriage, and the practical interests served by that

policy. Id. at 844-45. The court found, however, that “[t]hese policy considerations cannot

justify denial of Unruh Civil Rights Act protection to domestic partners, whatever their

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 14 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

15

application to other unmarried individuals and couples.” Id. at 845. The court concluded

that the Domestic Partner Rights and Responsibilities Act of 2003 (effective January 1,

2005), by which the Legislature granted legal recognition comparable to marriage both

procedurally and in terms of substantive rights and obligations, was supported by policy

considerations similar to those that favor marriage. Id. Thus, the court found,

discrimination against registered domestic partners in favor of married couples is a type of

discrimination that falls within the ambit of the Unruh Act. Id. at 846.

The court then analyzed the second and third prongs of the Harris test, while

simultaneously distinguishing the Beaty court’s findings. In particular, the court found the

Beaty court’s concerns inapplicable to registered domestic partners. Id. at 846-48. The

court also addressed the Beaty court’s argument that the Legislature’s failure to add marital

status to the list of characteristics protected under the Unruh Act was somehow significant,

declaring that the Legislature’s failure to amend the Act to expressly prohibit discrimination

against domestic partners “is a particularly weak barometer of legislative intent.” The court

added, “No specific legislative declaration is required for this court to infer from the

statement of legislative intent accompanying the Domestic Partner Act an intent that

registered domestic partners should not be discriminated against in favor of married

couples in public accommodations.” Id. at 849. 

Finally, while it found that the defendant country club’s spousal benefit policy did not

constitute impermissible marital status discrimination on its face prior to the effective date

of the Domestic Partner Act, the court indicated that it would consider whether plaintiffs

should be able to proceed on a claim that the policy, as applied, violated the Unruh Act

prior to January 1, 2005. Id. at 851-52.

With regard to sexual orientation, plaintiffs had argued that using marriage as a

criterion for allocating benefits necessarily denied such benefits to all the country club’s 

homosexual members, who, like plaintiffs, were unable to marry in California. The court

compared this claim to the claim in Harris, where the plaintiffs had argued that the

defendant landlord’s minimum income policy constituted gender discrimination because of

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 15 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

16

its disparate impact on women, who were more likely to be receiving public assistance and

who generally had lower-paying jobs than men did. Id. at 853 (citing Harris, 52 Cal. 3d at

1170). The court noted that it had previously rejected this theory, on the basis that the

Unruh Act prohibits intentional acts of discrimination, not disparate impact. Id. at 853-54. 

The court recognized, however, that the plaintiffs had cast their claim as one of

disparate treatment rather than disparate impact, by alleging that discriminatory intent was

established by country club’s adoption of marriage as the criterion by which to extend

benefits to some of its members, but not to others, for the reason that gays and lesbians

cannot marry in California. Plaintiffs had also asserted that a policy or classification, in

itself permissible, may nonetheless be illegal if it is merely a device employed to

accomplish the prohibited discrimination. Nevertheless, the court found no evidence

supporting plaintiffs’ claim that the country club had adopted its spousal benefit policy to

accomplish discrimination on the basis of sexual orientation, and concluded that plaintiffs’

argument still seemed to be based on the effects of a facially neutral policy. Id. at 854.

The court did find evidence, however, that the country club had not applied its

facially neutral policy in an impartial manner – specifically, evidence that unmarried,

heterosexual members of the country club were granted membership privileges to which

they were not entitled, while plaintiffs were denied such privileges purportedly pursuant to

the country club’s spousal benefit policy. Id. There was also evidence that the directors of

the country club were motivated by animus toward plaintiffs because of their sexual

orientation. Id. The court determined that the plaintiffs should be allowed to try to establish

that, prior to 2005, the spousal benefit policy was applied in a discriminatory fashion in

violation of the Unruh Act. Id. at 855.

Later that year (2005), the Legislature amended the Unruh Act to substitute “medical

condition, marital status, or sexual orientation” for “or medical condition.” See 2005 Cal.

Legis. Serv. Ch. 420 (A.B. 1400). This amendment was effective January 1, 2006. In

addition, the Legislature appended the following findings:

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 16 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

17

(a) Even prior to the passage of the Unruh Civil Rights Act, California law

afforded broad protection against arbitrary discrimination by business

establishments. The Unruh Civil Rights Act was enacted to provide broader,

more effective protection against arbitrary discrimination. California’s interest

in preventing that discrimination is longstanding and compelling.

(b) In keeping with that history and the legislative history of the Unruh Civil

Rights Act, California courts have interpreted the categories enumerated in

the act to be illustrative rather than restrictive. It is the intent of the

Legislature that these enumerated bases shall continue to be construed as

illustrative rather than restrictive.

(c) The Legislature affirms that the bases of discrimination prohibited by

the Unruh Civil Rights Act include, but are not limited to, marital status and

sexual orientation, as defined herein. By specifically enumerating these

bases in the Unruh Civil Rights Act, the Legislature intends to clarify the

existing law, rather than to change the law, as well as the principle that the

bases enumerated in the act are illustrative rather than restrictive.

(d) It is the intent of the Legislature that the amendments made to the

Unruh Civil Rights Act by this act do not affect the California Supreme Court’s

rulings in [Marina Point] and [O’Connor]. 

Cal. Civ. Code. § 51, Historical Notes – Historical and Statutory Notes.

Thus, as of January 1, 2005, based on the Koebke decision, the Unruh Act clearly

prohibited marital status discrimination against registered domestic partners in California. 

As of January 1, 2006, based on the 2005 amendments to the Unruh Act and the

Legislative findings, the Unruh Act clearly prohibits discrimination based on marital status

(regardless of whether the affected persons are registered domestic partners) and also

based on sexual orientation (though this had previously been established by judicial

decisions dating back to the mid-1980s). The Legislature has also confirmed that the

enumerated characteristics should be construed as illustrative rather than restrictive. 

C. The Parties’ Motions

1. Choice of Law

Defendants argue that California law does not apply to plaintiffs’ substantive claims, 

while plaintiffs contend that it does. 

a. Standard for Determining Applicable Law

Federal courts sitting in diversity look to the law of the forum state when making a

choice-of-law determination. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 17 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

18

(1941); Sparling v. Hoffman Const. Co., Inc., 864 F.2d 635, 641 (9th Cir. 1988); see also

Fields v. Legacy Health Sys., 413 F.3d 943, 950 (9th Cir. 2005). Thus, because the

complaint in the present action was filed in California, California's choice-of-law rules apply.

In the absence of an effective choice of law by the parties, California applies the

"governmental interest" test. Washington Mutual Bank FA v. Superior Court, 24 Cal. 4th

906, 919-20 (2001). Under that analysis, 

a court carefully examines the governmental interests or purposes served by

the applicable statute or rule of law of each of the affected jurisdictions to

determine whether there is a “true conflict.” If such a conflict is found to exist,

the court analyzes the jurisdictions’ respective interests to determine which

jurisdiction’s interests would be more severely impaired if that jurisdiction’s

law were not applied in the particular context presented by the case.

Kearney v. Salomon Smith Barney, Inc., 39 Cal. 4th 95, 100 (2006) (citing Reich v. Purcell,

67 Cal. 2d 551 (1967); Hurtado v. Superior Court, 11 Cal. 3d 574 (1974); Bernhard v.

Harrah’s Club, 16 Cal. 3d 313 (1976); Offshore Rental Co. v. Continental Oil Co., 22 Cal.

3d 157 (1978)). 

Kearney reflects the California Supreme Court’s most recent thinking regarding the

application of the “governmental interest” test. In that case, two California clients of

Salomon Smith Barney (“SSB”) filed a class action alleging that telephone calls they had

made to brokers at SSB’s Georgia office had been tape-recorded without the clients’

consent, in violation of California Penal Code § 637.2. Penal Code § 637.2 authorizes a

civil cause of action for any violation of California’s invasion-of-privacy statutory scheme,

and Penal Code § 632 is the specific portion of that scheme that governs the unlawful

recording of telephone conversations. Plaintiffs also alleged a cause of action under

California Business & Professions Code § 17200. Kearney, 39 Cal. 4th at 102.

SSB demurred to the complaint. The trial court sustained the demurrer, concluding

that under both Georgia and federal law, recordings may be lawfully made in Georgia by

one party without the other party’s knowledge or consent, and that SSB’s conduct could

therefore not be viewed as unlawful or unfair or deceptive under § 17200. The court found

further that any attempt to apply Penal Code § 632 to recordings made in Georgia would be

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 18 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

19

preempted by federal law and would violate the Commerce Clause. Id. at 102-03.

The court of appeal affirmed the trial court’s judgment, but on the basis that under

the specific facts of the case, Georgia had a greater interest in having its law applied. Id. at

103. The California Supreme Court granted the petition for review to address what it

termed the “novel choice-of-law issue presented by this case.” Id. The court initially

disposed of SSB’s arguments regarding personal jurisdiction, legislative jurisdiction and

extraterritorial application of state law, federal preemption, and the Commerce Clause, id.

at 103-07, and then addressed the choice-of-law issue, which it termed “the only

substantial issue presented by the case.” Id. at 107. 

The court summarized the governmental interest approach, as follows. 

First, the court determines whether the relevant law of each of the potentially

affected jurisdictions with regard to the particular issue in question is the

same or different. Second, if there is a difference, the court examines each

jurisdiction’s interest in the application of its own law under the circumstances

of the particular case to determine whether a true conflict exists. Third, if the

court finds that there is a true conflict, it carefully evaluates and compares the

nature and strength of the interest of each jurisdiction in the application of its

own law “to determine which state’s interest would be more impaired if its

policy were subordinated to the policy of the other state” . . . and then

ultimately applies “the law of the state whose interest would be the more

impaired if its law were not applied.” 

Id. at 107-08 (citation omitted). 

The court then reviewed four of its previous decisions on the issue – Reich, Hurtado,

Bernhard, and Offshore Rental. The first two cases – Reich and Hurtado – presented “no

true conflict” because in each case, only one of the states involved had an interest in

having its law applied. The last two cases – Bernhard and Offshore Rental – each

presented a “true conflict,” because in those cases, each state had an interest in having its

law applied, which required the court to conduct a “comparative impairment” analysis. 

In Reich, a 1967 decision, the plaintiffs – Mr. Reich and one of his children – filed a

wrongful death action after Mrs. Reich and the Reichs’ other child were killed in an

automobile accident while traveling through Missouri. The Reichs were residents of Ohio at

the time of the accident. After the accident, Mr. Reich and the surviving child moved to

California. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 19 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

20

The suit was filed in a California court. The trial court held that Missouri law applied

because the accident had taken place in Missouri. Missouri had a limit of $25,000 on

wrongful death damages, while Ohio and California had no such limits. The question was

whether the law of Missouri, California, or Ohio should apply.

The California Supreme Court rejected the “law of the place of the wrong” rule, and

instead adopted the “governmental interest” test. Reich, 67 Cal. 2d at 555-56. The court

found that California had no interest in the case because plaintiffs were not California

residents at the time of the accident, and because California law did not limit damages. 

The court found further that Missouri’s interest was local, and did not apply to extend

protection to travelers from another state. Ohio had a substantial interest in having its law

applied, while Missouri did not. Thus, the court found, the case did not present a true

conflict and Ohio law applied.

The facts in Hurtado, a 1974 decision, were somewhat similar to the facts in Reich. 

The plaintiffs (widow and children of Antonio Hurtado) filed a wrongful death action in

California. Antonio Hurtado had been riding in an automobile owned and operated by his

cousin, defendant Manuel Hurtado, and was killed when Manuel Hurtado’s automobile

collided with a pick-up truck owned and operated by defendant Jack Rexius. The plaintiffs

(Widow Hurtado and children) and the decedent (Antonio Hurtado) were residents of

Mexico, and defendants Manuel Hurtado and Jack Rexius were California residents. All

vehicles were registered in California. 

At the time of the accident, Mexico had a law that limited damages in wrongful death

actions, while California had no limit. The question was whether the court should apply the

law of California or the law of Mexico.

The California Supreme Court noted the importance of correctly identifying the

various interests in a particular type of action. The court concluded that where a state’s

laws limit damages in a wrongful death action, the interest of the state is to protect

defendants from excessive financial burdens or exaggerated claims. This interest is local,

because it is designed to protect residents of the state. However, the court found that

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 20 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

 This law was subsequently abrogated by the California Legislature. See Cory v.

Shierloh, 29 Cal. 3d 430, 435 (1981).

21

Mexico had no interest in applying its limitation of damages because it had no defendant

residents to protect with such limitation – it was the plaintiffs who were the residents of

Mexico, not the defendants. Hurtado, 11 Cal. 3d at 583-84.

In Bernhard, a 1976 decision, the California Supreme Court was confronted with a

“true conflict” case for the first time since adopting the “governmental interest” analysis. 

Bernhard was a dramshop-liability case. The plaintiff, a resident of California, was injured

in California by a drunk driver. The defendant, Harrah’s Club, was the owner of a Nevada

tavern that had served alcohol to the driver who injured the plaintiff. 

Plaintiff filed suit in California, under a law that allowed a person injured by an

intoxicated driver to file a civil action to recover damages from a negligent tavern owner.5

In Nevada, by contrast, while it was a crime to sell alcohol to an intoxicated person, the

state courts had ruled that a tavern owner could not be held civilly liable in tort for injuries

caused by that intoxicated person. 

The court found that this presented a true conflict because each state had an

interest in the application of its respective law of liability, and the interests of the two states

conflicted. Nevada had an interest in having its decisional rule applied to protect its tavern

owners from being subjected to a form of civil liability that Nevada declined to impose. 

California, on the other hand, had an interest in applying its rule imposing liability in such

circumstances, because the rule was intended to protect members of the public from

injuries to persons and property resulting from excessive use of intoxicating liquor. 

California also had a special interest in extending this protection to California residents

injured in California. Bernhard, 16 Cal. 3d at 322-24. The question was whether California

or Nevada law applied.

The court applied the third part of the governmental interest test – the “comparative

impairment” analysis – to determine which state’s interest would be more impaired if its

policy were subordinated to the policy of the other state. Id. at 320. The court first noted

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 21 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

22

that Harrah’s “by the course of its chosen commercial practice” had “put itself at the heart

of California’s regulatory interest, namely to prevent tavern keepers from selling alcoholic

beverages to obviously intoxicated persons who are likely to act in California in the

intoxicated state.” Id. at 322. 

The court observed that California “cannot reasonably effectuate its policy if it does

not extend its regulation to include out-of-state tavern-keepers such as defendant who

regularly and purposefully sell intoxicating beverages to California residents,” under

circumstances in which it is likely that intoxicated persons will return to California while still

in an intoxicated state. Id. at 322-23. The court found that California’s interest would be

significantly impaired if its policy were not applied to defendant Harrah’s. Id. at 323. 

In Offshore Rental, a 1978 decision, a California corporation filed suit in California

against an out-of-state corporation (which did business in California, Louisiana, and other

states), alleging damage to business interests. The California corporation sought to

recover damages for loss of services of one of its key corporate officers, who was injured at

the defendant corporation’s Louisiana premises. The question was whether California or

Louisiana law applied.

Although Louisiana law allowed a “master” to bring an action “against any man for

beating or maiming his servant,” Louisiana courts had ruled that a corporate plaintiff could

not state a cause of action under that law for loss of services of its officer. California cases,

on the other hand, seemed to support a cause of action under California Civil Code § 49,

which provided that “[t]he rights of personal relations forbid . . . any injury to a servant

which affects his ability to serve his master.” California courts had indicated that a

corporation could assert a claim under Civil Code § 49 against a third party for negligent

injury to a key employee. 

The California Supreme Court found that the laws of Louisiana and California were

directly in conflict, and looked at the governmental policies underlying the laws of the two

states, in order to determine whether either state had an interest in applying its policy to the

case. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 22 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

23

Louisiana’s refusal to permit recovery for loss of a key employee’s services was

predicated on a policy of “protect[ing] negligent resident tort-feasors acting within

Louisiana’s borders from the financial hardships caused by the assessment of excessive

legal liability or exaggerated claims resulting from the loss of services of a key employee.” 

Offshore Rental, 22 Cal. 3d at 163-64. “Clearly,” the court observed, “the present

defendant is a member of the class which Louisiana law seeks to protect, since defendant

is a Louisiana ‘resident’ whose negligence on its own premises has caused the injury in

question,” and “negation of plaintiff’s cause of action serves Louisiana’s policy of avoidance

of extended financial hardship to the negligent defendant.” Id. at 164.

The court recognized as “equally clear,” however, that “application of California law

to the present case will further California’s interest,” noting that California, through Civil

Code § 49, “expresses an interest in protecting California employers from economic harm

because of negligent injury to a key employee.” Id. Moreover, “California’s policy of

protection extends beyond such an injury inflicted within California, since California’s

economy and tax revenues are affected regardless of the situs of physical injury.” Id. 

Having found a true conflict between the law of Louisiana and the law of California,

the court proceeded with the analysis to determine which state’s interest would be more

impaired if its policy were subordinated to the policy of the other state. This analysis,

according to the court, does not involve “weighing” the conflicting governmental interests, in

the sense of determining which interest is “worthier” or expresses the “better” social policy,

but rather can be viewed as an attempt to determine “the relative commitment of the

respective states to the laws involved.” Id. at 165-66 (citations omitted). “The approach

incorporates several factors . . . [including] the history and current status of the states’ laws;

[and] the function and purpose of those laws.” Id. at 166. 

The court characterized the Louisiana law as being in the “main stream” of American

jurisdictions, as the majority of states that had considered the question did not sanction

actions for harm to business employees. Id. at 167-68. By contrast, California had

exhibited little interest in applying Civil Code § 49, no California court had squarely held

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 23 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

24

that California law provides a cause of action for harm to business employees, and no

California court had recently considered the issue at all. Id. at 168. Thus, to the extent that

§ 49 provided a cause of action for injuries to key corporate employees, it nonetheless

constituted a law that was “archaic and isolated in the context of the laws of the federal

union,” and California’s interest in the application of its unusual and outmoded statute was

comparatively less strong than Louisiana’s corollary interest in its “prevalent and

progressive law.” Id. 

The court found further that while the “law of the place of the wrong” is not

necessarily the applicable law for all tort actions, “the situs of the injury remains a relevant

consideration.” Id. The court found that Louisiana had a “vital interest in promoting

freedom of investment and enterprise within Louisiana’s borders, among investors

incorporated both in Louisiana and elsewhere,” and that the imposition of liability on the

defendant would “strike at the essence of a compelling Louisiana law.” Id. The court also

noted that the plaintiff corporation was particularly able to calculate risks and plan

accordingly, by purchasing “key employee” insurance – and indeed, should have

anticipated a need for such protection – whereas defendant reasonably did not anticipate a

need for insurance to protect against “key employee” losses at its Louisiana facility, as that

type of loss is not actionable under Louisiana law. Id. at 168-69. 

Following its review of the Reich, Hurtado, Bernhard, and Offshore Rental decisions,

the Kearney court turned to an examination of the facts of the case before it, in order to

determine whether California law or Georgia law apply to the recording of a telephone

conversation that occurs between a person in California and a person in Georgia.

The court first analyzed the California statutory scheme, noting that Penal Code 

§ 632 – the law prohibiting the recording of telephone conversations without the knowledge

of both participants – was part of California’s broad, protective invasion-of-privacy statute. 

Kearney, 39 Cal. 4th at 115-16. Further, the legislatively prescribed purpose of the 1967

invasion-of-privacy statute “is to ‘protect the privacy of the people of this state.’” Id. at 119

(citing Penal Code § 630). 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 24 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

25

The court found that the stated purpose “certainly supports application of the statute

in a setting in which a person outside California records, without the Californian’s

knowledge or consent, a telephone conversation of a California resident who is within

California.” Id. “The privacy interest protected by the statute is no less directly and

immediately invaded when a communication within California is secretly and

contemporaneously recorded from outside the state than when this action occurs within the

state.” Id. 

The court then turned to the Georgia law. The basic provision of the Georgia statute

is the prohibition of the employment of devices that would permit the clandestine

“overhearing, recording or transmitting of conversations or observing of activities which

occur in a private place.” Id. at 121 (citing Ga. Code Ann. § 16-11-62). The policy

underlying the statute is the public policy of the state to “‘protect the citizens of this State

from invasions upon their privacy.’” Id. At the same time, however, another provision of

that statutory scheme provides that nothing in § 16-11-62 “shall prohibit a person from

intercepting a wire, oral, or electronic communication where such person is a party to the

communication or one of the parties to the communication has given prior consent to such

interception.” Id. (citing Ga. Code Ann. § 26-11-66). 

Georgia courts have long interpreted the Georgia privacy statutes as not applicable

when a conversation is recorded by one of the participants in the conversation. Id. at 121-

22. Thus, the court noted, Georgia law differs from California law in this respect, although

nothing in either law addresses whether the law is intended to apply to a telephone call in

which one of the parties is in another state. Id. at 122.

The Kearney court concluded that the case presented a true conflict – California had

a legitimate interest in having its law applied because the plaintiffs were California residents

whose telephone conversations in California were recorded without their knowledge or

consent; and Georgia had a legitimate interest in not having liability imposed on persons or

businesses who acted in Georgia in reliance on the provisions of Georgia law, because the

conduct at issue in the case involved activity engaged in by defendant’s employees in

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 25 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

26

Georgia. Id. at 123.

The court then considered which state’s interest would be more impaired if its policy

were subordinated to the policy of the other state. Id. at 124. The court first looked at the

degree of impairment of California’s interest that would result if Georgia law rather than

California law were applied. The court noted that unlike the situation in Offshore Rental,

the California statute in question was not “ancient” or “little used.” Rather, California courts

have repeatedly invoked and vigorously enforced the provisions of Penal Code § 632. Id. 

Moreover, the court noted, in recent years the California Legislature has continued

to add provisions and make modifications to the invasion-of-privacy statutory scheme at

issue, which, along with California’s constitutional privacy provision (Cal. Const., art. I, § 1)

was enacted specifically to protect Californians from overly intrusive business practices. Id.

at 125. The court concluded that California had a strong and continuing interest in the full

and vigorous application of all the provisions of Penal Code § 632 prohibiting the recording

of telephone conversations, and that the failure to apply the statute would substantially

undermine the protection it afforded. Id. 

The court concluded that the application of California law would have a relatively

less severe effect on Georgia’s interests, than would the application of Georgia law on

California’s interests. Id. at 126. First, because California law was more protective of

privacy interests than the comparable Georgia statute, the application of California law

would not violate any privacy interest protected by Georgia law. Id. at 126-27. 

Second, with regard to businesses in Georgia that record telephone calls, California

law would apply only to those calls made to or received from California, not to all calls to

and from such Georgia businesses, and it would be easy to identify both the calls being

made to California residents, and the calls coming in from California residents. Id. at 127. 

Third, applying California law to a Georgia business’ recording of telephone calls

between its employees and California customers would not severely impair Georgia’s

interests. The calls could still be made and could still be recorded – the only requirement

would be that the recording not be secret or undisclosed. Id. Further, to the extent that the

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 26 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

27

Georgia law is intended to protect a business’ ability to secretly record calls to and from its

customers, the application of California law to those calls made to and from California

customers “would represent only a relatively minor impairment of Georgia’s interests.” Id. 

The court concluded that because the interests of California would be severely

impaired if Georgia law were applied, and because the interests of Georgia would not be

significantly impaired if California law were applied, California law should apply in

determining whether the alleged secret recording of telephone conversations at issue in the

case constitutes an unlawful invasion of privacy. Id. at 127-28. 

b. Whether California Law Applies in the Present Action

In issuing its decision in Kearney, the California Supreme Court did not change the

law regarding choice-of-law analysis. The “governmental interest” test, as previously

articulated and applied in Reich, Hurtado, Bernhard, and Offshore Rental, still provides the

basis for determining which state’s law applies in a case involving multi-state interests. 

This court now considers whether, in light of this analysis, plaintiffs can assert claims

under California law in the present case.

i. whether the laws of Arizona differ from the laws of California 

The parties agree – though for different reasons – that Arizona law differs from

California law. Defendants assert that the issue for choice-of-law analysis is not merely

whether Arizona and California treat sexual orientation and marital status discrimination

differently, but whether the acts about which plaintiffs complain could support a claim under

Arizona law. They argue that Arizona does not permit same-sex couples to adopt jointly,

and that same-sex couples have no claim for discrimination based on being treated

differently than married couples when it comes to adoption or marriage. They also contend

that because a same-sex couple cannot jointly adopt in Arizona, there can be no claim for

discrimination in Arizona based on the refusal to “publish” a profile for a same-sex couple. 

Plaintiffs, on the other hand, focus on the fact that while California law prohibits

discrimination on the basis of sexual orientation and marital status, Arizona law does not

affirmatively permit Arizona businesses to discriminate against gays or lesbians or

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 27 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

28

domestic partners, Arizona’s public accommodation statute is silent with regard to

discrimination on the basis of sexual orientation and marital status, and Arizona courts

have not ruled on the question whether the state’s public accommodation statute forbids

discrimination against same-sex couples. Plaintiffs contend that while Arizona has no state

law prohibiting sexual orientation discrimination by business establishments, it does not

condone such discrimination. They also note that various localities in Arizona have

promulgated local policies prohibiting discrimination based on sexual orientation or marital

status in public accommodation and other areas. 

Both Arizona and California have enacted anti-discrimination laws, and laws

governing adoption and marriage. California’s Unruh Act is discussed at length above. 

The Arizona Civil Rights Act of 1965 prohibits discrimination in places of public

accommodation, “against any person because of race, color, religion, sex, national origin or

ancestry.” Ariz. Rev. Stat. § 41-1442. It is unlawful under this statute to deny or withhold

“accommodations, advantages, facilities, or privileges thereof” based on the enumerated

characteristics, or to make any distinction “with respect to any person” based on the

enumerated characteristics, “in connection with the price or quality of any item, goods or

services offered by or at any place of public accommodation.” Id. 

“Places of public accommodation” under § 41-1442 include 

all public places of entertainment, amusement or recreation, all public places

where food or beverages are sold for consumption on the premises, all public

places which are conducted for the lodging of transients or for the benefit, use

or accommodation of those seeking health or recreation, and all

establishments which cater or offer their services, facilities or goods to solicit

patronage from members of the general public. 

Ariz. Rev. Stat. § 41-1441. 

On its face, the Arizona statute is similar to the pre-1987 version of the Unruh Act –

prior to addition of disability, medical condition, marital status, and sexual orientation to the

list of protected characteristics – except that it uses the term “public accommodations”

rather than “business establishments.” As interpreted by the Arizona courts, however,

there is a significant difference. No Arizona court has ever held, as has the California

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 28 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

 The Court of Appeals of Arizona held in 2003 that Arizona’s prohibition of same-sex

marriages is constitutional. Standhardt v. Superior Court, 206 Ariz. 276, 77 P.3d 451 (Ariz.

App. 2003). 

7

 Prior to 1996, the relevant statute had provided that “[m]arriages valid by the laws of

the place where contracted are valid in this state.” Ariz. Code of 1939 § 63-108 (currently

codified as Ariz. Rev. Stat. § 25-112(A)). 

29

Supreme Court with regard to the Unruh Act, that the categories specified in ARS § 41-

1442 are “illustrative” only. Moreover, the Arizona statute was enacted in 1965; prior to that

time, Arizona had no state laws prohibiting discrimination in public accommodations. 

The adoption and marriage laws of the two states are similar in some respects, but

different in others. Under Arizona law, “[a]ny adult resident of this state, whether married,

unmarried or legally separated is eligible to qualify to adopt children. A husband and wife

may jointly adopt children.” Ariz. Rev. Stat. § 8-103. This statute was adopted in 1970,

and has not been amended since.

Because the statute allows adoption by “[a]ny” adult resident, it does not regulate

adoption on the basis of the sexual orientation of a single adoptive parent. Moreover, in

April 2006, HB 2696, a bill that would have given married couples preference over single

people in adopting children, was defeated in the Arizona Legislature. See

http://www.azleg.gov/FormatDocument.asp?inDoc=/legtext/47leg/2r/bills/hb1696o.asp.

Arizona law does not say anything about joint adoptions, other than that a “husband

and wife” may jointly adopt. Arizona does have a law, added in 1996, providing that

“[m]arriage between persons of the same sex is void and prohibited.” Ariz. Rev. Stat. § 25-

101(C).6 With the same bill, the Legislature amended the law relating to marriages

contracted in other states, to provide that “[m]arriages valid by the laws of the place where

contracted are valid in this state, except marriages that are void and prohibited by § 25-

101.” Ariz. Rev. Stat. § 25-112.7

 

Thus, since same-sex couples cannot marry in Arizona, and if married in another

state, will not be considered married in Arizona, they presumably would not qualify under

the “joint” adoption provision of § 8-103. However, Arizona law does not specifically

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 29 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

30

prohibit joint adoptions by same-sex couples. 

Arizona allows stepparent adoption. In Arizona, “stepparent adoption” refers to

“adoption by the spouse of the child’s parent.” Ariz. Rev. Stat. § 8-117(C); see also Ariz.

Rev. Stat. § 25-409(F) (visitation granted to grandparents or great-grandparents

automatically terminates if child is placed for adoption, except where the child is adopted

“by the spouse of a natural parent if the natural parent remarries”). Based on this language

– specifically, the reference to the “spouse” of the child’s parent – it is likely that a person of

the same sex as the child’s parent would not be eligible to adopt as a stepparent under

Arizona law, because that person cannot be a “spouse” (husband or wife). 

Arizona law is silent with regard to second-parent adoption. “Second-parent”

adoption has been defined in California as “an independent adoption whereby a child born

to [or legally adopted by] one partner is adopted by his or her non-biological or non-legal

second parent, with the consent of the legal parent, and without changing the latter’s rights

and responsibilities.” Sharon S. v. Superior Court, 31 Cal. 4th 417, 422 n.2 (2003) (citation

omitted). 

California permits “any adult” to adopt a minor child. Cal. Fam. Code § 8600. The

adult must be at least 10 years older than the child, unless the adult is a stepparent or

sister, brother, aunt, uncle or first cousin. Cal. Fam. Code § 8601. A married person may

not adopt a child without consent of his or her spouse. Cal. Fam. Code § 8603. Thus,

Arizona and California both permit single adoption without any limitation as to sexual

orientation, and joint adoption by married couples. 

California allows stepparent adoption, defined as the “adoption of a child by a

stepparent where one birth parent retains custody and control of the child.” Cal. Fam.

Code § 8543; see also Cal. Fam. Code §§ 9000-9007. However, unlike Arizona, California

does not classify stepparent adoption as adoption by the “spouse” of the child’s parent. 

Second-parent adoption is also legal in California. While there has never been a

statute expressly authorizing second-parent adoption, California adoption statutes have

always permitted adoption without regard to the marital status of prospective adoptive

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 30 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

 Section 308.5 is being challenged in the California courts. See In re Marriage Cases, 49 Cal. Rptr. 3d 675, review granted and opinion superseded by In re Marriage Cases, 149

P.3d 737, 53 Cal. Rptr. 3d 317 (Cal. 2006). 

31

parents. Sharon S., 31 Cal. 4th at 433. At least as early as 1999, the California

Department of Social Services – the agency that oversees county child welfare agencies

that perform home studies in adoption cases – had a stated policy that unmarried couples

seeking to adopt were to be evaluated on the same basis as married couples. Id. at 433

n.8. The California Supreme Court in Sharon S. noted that as of 2003, published materials

indicated that between 10,000 and 20,000 second-parent adoptions had been granted in

California over the years. However, it was not until August 4, 2003, that the California

Supreme Court (in Sharon S.) officially recognized the validity of second-parent adoptions. 

On March 8, 2000, the voters passed Proposition 22, an initiative providing that

“[o]nly marriage between a man and a woman is valid or recognized in California.” This law

is codified as California Family Code § 308.5. Pursuant to this statute, California will not

recognize same-sex marriages even if those marriages are validly formed in other

jurisdictions that permit same-sex marriage.8 Thus, like Arizona, California does not allow

same-sex couples to marry.

However, unlike Arizona, the California Legislature has enacted legislation allowing

civil unions (domestic partnerships). California created a “domestic partner registry” in

1999. See Cal. Fam. Code § 297 (effective January 1, 2000). The statute was

subsequently amended to expand the rights and obligations of domestic partners. In 2001,

the California Legislature enacted AB 25, which became effective on January 1, 2002. 

Among other things, AB 25 provided that registered domestic partners were entitled to use

the streamlined step-parent adoption procedures. See Cal. Fam. Code § 9000(g). Thus,

AB 25 equalized registered domestic partners with married spouses with regard to the

issue of adoption in California. 

As of January 1, 2005, California’s domestic partner law provides most of the same

rights and responsibilities of spouses under California law, such as complete inheritance

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 31 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

 Section 297.5 was unsuccessfully challenged in the California courts. The plaintiffs

argued that § 297.5 impermissibly amended Family Code § 308.5 (marriage is between a man

and a woman) without voter approval in violation of the California Constitution. The Court of

Appeal found that the language of Proposition 22 said nothing about precluding the Legislature

from granting rights to domestic partners that were the equivalent of rights granted to married

couples. See Knight v. Superior Court, 128 Cal. App. 4th 14 (2005). 

32

rights, community property, joint responsibility for debt, and the right to request support

from the other partner upon dissolution of the partnership. Cal. Fam. Code § 297.5.9 

While Arizona law does not authorize civil unions, the voters of the state recently

rejected an attempt to make the enactment of such laws impossible in the future, by

rejecting Proposition 107 in the Arizona November 2006 state-wide election. Proposition

107 would have amended the Arizona Constitution to state that marriage consists of a

union of one man and one woman, and to prohibit the state and its political subdivisions

from creating or recognizing any legal status for unmarried persons that is similar to that of

marriage. See http://www.azsos.gov/election/2006/General/ballotmeasures.htm.

Thus, as of 2002, when the Butlers sought to have their profile posted on

ParentProfiles.com, Arizona state law did not prohibit discrimination on the basis of sexual

orientation or marital status; any single person could petition to adopt in Arizona; there was

no prohibition against single homosexual persons becoming adoptive parents; there was no

law prohibiting joint adoptions by same-sex couples, although the law explicitly provided for

joint adoptions only by “husband and wife;” and there was no law explicitly prohibiting

same-sex second-parent adoptions. The law regarding adoptions is the same today – plus,

the Arizona Legislature recently defeated a bill that would have given preference to married

couples over single people in adoption.

As of 2002, California prohibited discrimination in public accommodations on the

basis of sexual orientation; it was an open question whether discrimination on the basis of

marital status was also prohibited; any single person could adopt in California; there was no

law prohibiting adoptions by same-sex couples; and California allowed stepparent and

second-parent adoptions without reference to sexual orientation or marital status, and had

equalized registered domestic partners with married spouses with regard to the issue of

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 32 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

33

adoption. 

Having determined that the laws of the two states differ in some respects, as

explained above, the court now considers whether a true conflict exists. 

ii. whether a true conflict exists

Both plaintiffs and defendants argue that no true conflict exists in this case.

Defendants contend that there is no true conflict because Arizona has an interest in

applying its own laws under the facts of this case, while California does not. Defendants

assert that Arizona has an interest in determining which business practices that occur in

Arizona will subject Arizona businesses to liability; in ensuring that businesses operating

within its borders are not subjected to liability for activities or practices that are legal in

Arizona; and in assuring that its citizens are not penalized when they enter into or refuse to

enter into contracts in Arizona with persons from the minority of states with substantially

different laws, such as those that prohibit marital status discrimination or sexual orientation

discrimination. 

Defendants contend that California has a limited interest – if any – in applying its

law. They claim that the “policy” interests upon which plaintiffs rely are still developing

within California – noting that the California Legislature only recently included sexual

orientation discrimination or marital status discrimination in the list of prohibited conduct

under the Unruh Act; claiming that it was not clear until recently that two “unrelated”

persons (presumably meaning “unmarried”) had the right to adopt a child under California

law; and asserting that no court has found that marital status discrimination was prohibited

under the Unruh Act prior to January 1, 2005. Thus, they contend, California cannot be

deemed to have had a strong commitment in 2002 to the policies underlying plaintiffs’

claims.

Defendants also argue that the Unruh Act’s stated purpose – “to guarantee access

to public accommodations on the part of all persons [in California] regardless of race, sex,

religion, or other characteristics that have no bearing on a person’s status as a responsible

consumer,” Harris, 52 Cal. 3d at 1168 – makes it clear that California’s interest relates to

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 33 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10 Defendants refer to “Internet server” and “Web server” interchangeably, without

defining those terms. Although the court could not locate a definition for “Internet server,” a

“Web server” can be either 1) a computer that is responsible for accepting HTTP requests from

clients, which are known as Web browsers, and serving them HTTP responses along with

optional data contents, which are usually Web pages such as HTML documents and linked

objects (images, etc.); or 2) a computer program that provides the functionality described in

the first sense of the term. See http://en.wikipedia.org/wiki/Web_server (last visited March 30,

2007). Since plaintiffs appear to be talking about the physical location of the server, they must

be referring to a computer. 

34

accommodations in California. Defendants argue that because Adoption.com’s business

operations, office facilities, and “Internet servers”10 are located in Arizona, and because

ParentProfiles.com may be accessed in California only after a person in California sends a

request for information to the Internet server located in Arizona, a resident of California

must, in effect, go to Arizona in order to obtain services from defendants. Thus, according

to defendants, the public accommodation at issue is in Arizona rather than in California. 

They contend that California has no interest in mandating a public accommodation in

another state.

Plaintiffs also claim that there is no true conflict in this case. However, they argue

that the absence of a true conflict means that California is entitled to apply its own law. 

They submit that there is no true conflict between the laws of the two states because only

California law is affected, asserting that a true conflict exists only where, as stated by the

court in Offshore Rental, “each of the states involved has a legitimate but conflicting

interest in applying its own law will we be confronted with a true conflicts case.” Offshore

Rental, 22 Cal. 3d at 163 (emphasis added). 

Plaintiffs contend that this case directly implicates the primary purpose of the Unruh

Act – to guarantee access to public accommodations for all Californians – and that

California courts have invoked and vigorously enforced the Unruh Act from its inception to

the present. They also note that the 2005 amendments to the Unruh Act added language

expressly codifying the prohibition against discrimination on the basis of sexual orientation

and marital status. Thus, they argue, as in Kearney, “California must be viewed as having

a strong and continuing interest in the full and vigorous application” of its law in this case. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 34 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

35

See Kearney, 39 Cal. 4th at 124-25. Plaintiffs assert that Arizona has no legitimate interest

in a policy of discrimination on the basis of sexual orientation or marital status.

The California Supreme Court found a “true conflict” in Bernhard, in Offshore Rental,

and in Kearney because in each of those cases, the laws of two states were in conflict, and

that conflict reflected competing state interests. In Bernhard, Nevada law held that tavern

owners were not liable for injuries caused by drunk drivers who had obtained alcohol from

the tavern owners, while California law imposed liability on the tavern owners for such

injuries. In Offshore Rental, Louisiana law held that a corporate plaintiff could not bring a

claim for the loss of services of one of its officers, while California law arguably allowed

such a claim. In Kearney, it was legal under Georgia law to record a telephone

conversation if only one of the participants knew it was being recorded, but illegal under

California law to record such a conversation unless both participants were aware of the

recording. 

In the present case, neither the Arizona Civil Rights Law nor the Unruh Act

specifically prohibited discrimination on the basis of sexual orientation or marital status in

2002. However, while there are no reported Arizona cases holding (even up to the present)

that either of those characteristics can provide a basis for a claim of discrimination in public

accommodations under the Arizona Civil Rights Law, a number of California cases had held

by 1984, at least with regard to discrimination on the basis of sexual orientation, that such

discrimination was prohibited by the Unruh Act. As of January 2006, of course, the Unruh

Act unambiguously prohibits discrimination on the basis of both sexual orientation and

marital status.

Also as of October 2002, both Arizona and California allowed any single person to

adopt. Neither Arizona nor California had a law prohibiting adoptions by same-sex couples

– although Arizona law explicitly provided for joint adoptions only by “husband and wife,”

and defined “stepparent” adoption as adoption by the “spouse” of the child’s parent; while

California allowed both stepparent and second-parent adoptions, regardless of the gender

of the adoptive parents. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 35 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

36

While the differences between the laws of Arizona and California are not as distinct

as the differences at issue in Bernhard, Offshore Rental, and Kearney, this case arguably

presents a true conflict, if only for the reason that it is unlikely that plaintiffs could have

brought a similar discrimination claim under Arizona law. California has a strong interest in

enforcing its anti-discrimination laws. It is less clear what interest Arizona might have in

allowing discrimination in public accommodations on the basis of sexual orientation or

marital status, or in applying its own law to California residents. The only interest plaintiffs

have articulated is Arizona’s interest in protecting its resident businesses from uncertainty.

Plaintiffs have supported their position with citations to the Unruh Act and the cases

that have interpreted it, while defendants have provided no support for their claim that

Arizona has a strong interest in protecting its businesses from “surprise” penalties in the

form of liability under the anti-discrimination laws of other states. It is true that the courts in

Kearney, Offshore Rental, and Bernhard considered a similar interest under the facts of

those cases with regard to Georgia, Louisiana, and Nevada, respectively. See Kearney, 39

Cal. 4th at 128-29; Offshore Rental, 22 Cal. 3d at 168; and Bernhard, 16 Cal. 3d at 318. 

But defendants have not pointed to any Arizona statute or judicial decision establishing that

Arizona has a paramount interest in ensuring certainty in business dealings for Arizona

businesses. Moreover, as the court in Kearney pointed out, “a company that conducts

business in numerous states ordinarily is required to make itself aware of and comply with

the law of a state in which it chooses to do business.” Kearney, 39 Cal. 4th at 105; see

also Bernhard, 16 Cal. 3d at 322-23. Nevertheless, in view of this finding that the interests

of the two states are not entirely in accord, the court will consider the “comparative

impairment” of each state’s interest. 

iii. which state’s interest would be more impaired if its law were not 

applied

Once it has determined that a true conflict exists, the court must carefully evaluate

and compare the nature and strength of the interest of each jurisdiction in the application of

its own law “to determine which state’s interest would be more impaired if its policy were

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 36 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

37

subordinated to the policy of the other state,” and must apply the law of the state whose

interest would be more impaired if its law were not applied. See Kearney, 39 Cal. 4th at

107-08.

Defendants argue that even if the court were to conclude that California has some

interest in having its laws applied, Arizona’s interest would be more impaired if its policy

were subordinated to the policy of California. Specifically, defendants contend that

Arizona’s interest in promoting freedom of investment and enterprise within its borders 

would be impaired if Arizona businesses have no assurance of what laws apply to “Arizona

activities.” They argue that applying California law in this case would impair Arizona’s

ability to provide the benefits and protections of its laws to Arizona businesses, while

applying Arizona law would not impede California’s ability to protect its own citizens from

discrimination within the bounds of its territorial jurisdiction.

The basis of California’s interest in applying its law in Kearney was that the principal

purpose of California’s privacy law is to protect the privacy of confidential communications

of California residents while they are in California. See Kearney, 39 Cal. 4th at 119-20. 

Defendants argue that the nature of secretly recording a phone call enables a person to

reach out from another state and perform the tort of invading the privacy of a person

in California, but that California has no similar interest in protecting its residents’ access to

public accommodations in other jurisdictions. Defendants claim that in order to find that

California has an interest in applying the Unruh Act in this case, the court would have to

find that the California Legislature intended to impose a duty on foreign Internet businesses

to make their services available to California residents. 

Plaintiffs, on the other hand, argue that California’s interest would be more impaired

if California law were not applied in this case. They argue that California’s strong interest is

shown in this case by the facts that the principal purpose underlying the Unruh Act is the

protection of California residents from discrimination in California business transactions,

and that the Legislature has continued to modify the Act and the courts have vigorously

enforced it. Plaintiffs also contend that California has a significant interest in this case

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 37 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

38

because this case involves family and adoption-related issues – issues that traditionally lie

in the domain of the states. Plaintiffs claim that in light of these strong public policies,

California’s interests would be significantly impaired by the failure to apply California law. 

Plaintiffs argue further that defendants have not shown and cannot show that

Arizona has an actual or significant stake in this litigation or that its interests will be

impaired if California law is applied. With regard to defendants’ claim that Arizona has an

interest in promoting “free enterprise,” plaintiffs argue that defendants have not shown that

this alleged interest would be promoted by permitting defendants to discriminate against

same-sex couples.

In sum, plaintiffs argue that the factors that led the Kearney court to find that

California law applied to the recording of telephone conversations between California

residents and persons located in other states also apply in this action, while defendants

maintain that California’s interest does not come into play because this case does not

involve discrimination against California residents in California. Defendants submit that all

the activity occurred in Arizona, where defendants and ParentProfiles.com’s server are

located. They argue that plaintiffs, in contacting defendants via the Internet, “traveled” from

California to Arizona, and were therefore “in” Arizona at the time of the alleged

discrimination. They argue that California has no interest in having its law applied

extraterritorially. 

Defendants claim that the Kearney court’s finding of a California interest that would

be severely impaired unless California law were applied – that is, the interest in protecting

individuals in California from the secret recording of confidential communications by or at

the behest of another party to the communication – has no relevance to the Unruh Act

claims at issue here. 

Defendants contend that it is well-established that the Unruh Act cannot be invoked

to regulate activities conducted in another state, even though the welfare of California

citizens may be affected when they travel to that state. In support, they cite Chaplin v.

Greyhound Lines, Inc., 1995 WL 419741 (N.D. Cal., July 3, 1995); State of Calif. Auto.

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 38 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11 Bigelow was a First Amendment case, in which a Virginia newspaper editor

challenged his conviction in Virginia for the crime of “encouraging or prompting the procuring

of an abortion.” The editor had published an advertisement indicating that abortion was legal

in New York and that there was no residency requirement. It was in that context that the

Supreme Court noted that Virginia possessed no authority to regulate services provided in

New York, and observed that “[a] State does not acquire power or supervision over the internal

affairs of another State merely because the welfare and health of its own citizens may be

affected when they travel to that State . . . [and] may not, under the guise of exercising internal

police powers, bar a citizen of another State from disseminating information about an activity

that is legal in that State.” Bigelow, 421 U.S. at 824-25. 

39

Dismantlers Ass’n v. Interinsurance Exchange, 180 Cal. App. 3d 735 (1986); and Archibald

v. Cinerama Hawaiian Hotels, Inc., 73 Cal. App. 3d 152 (1977). 

In Archibald, the plaintiff asserted that the defendant Hawai’ian hotel’s policy of

charging California residents a higher rate than it charged Hawai’i residents was

discriminatory in violation of the Unruh Act. The court found, however, that the Unruh Act,

by its express language, applied only within California, and could not be extended into the

Hawai’ian jurisdiction. The court cited Bigelow v. Virginia, 421 U.S. 809 (1975), for the

proposition that a state cannot regulate or proscribe activities conducted in another state or

supervise the internal affairs of another state in any way, even though the welfare or health

of its citizens may be affected when they travel to that state.11 Archibald, 73 Cal. App. 3d at

159 (citing Bigelow, 421 U.S. at 824-25). 

In Chaplin, the plaintiff asserted a claim under the Unruh Act for discriminatory

conduct that occurred while plaintiff was traveling on one of defendant’s buses in Texas. 

The court repeated the holding from Archibald (the language taken from Bigelow) that a

state cannot regulate or proscribe actions conducted in another state, even though the

welfare or health of its citizens may be affected when they travel to that state. Chaplin,

1995 WL 419741 at *5 (citing Archibald, 73 Cal. App. 3d at 159). Similarly, in Auto

Dismantlers, the court relied on Archibald and Bigelow to support its ruling that licensed

auto dismantlers could not seek to have California dismantling laws applied to buyers who

took vehicles out of the state to dismantle them. Auto Dismantlers, 180 Cal. App. 3d at

746.

Defendants argue that just as in Archibald, Chaplin, and Auto Dismantlers, this case

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 39 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

40

involves a wholly “extraterritorial” application of the Unruh Act to “conduct taking place

outside the state.” Defendants contend that plaintiffs have provided no evidence of any

activity of any specific defendant within California that would provide the basis for the

lawsuit. They claim that they have never contacted the plaintiffs, and that the only

connection the events have with California is that the plaintiffs live in California and

attempted, from California, to do business with an Arizona business. 

Defendants also dispute plaintiffs’ assertion that defendants have “actively and

consistently court[ed] California consumers and businesses.” They claim that the

undisputed facts in the summary judgment record show no evidence that Adoption Profiles

LLC has ever solicited a California consumer or business. Defendants assert that as of the

filing of this lawsuit, Adoption Profiles had done less than $38,000 worth of business with

California residents. 

Thus, according to defendants, California has no interest in applying the Unruh Act

to Adoption Profiles’ Arizona policy of “publishing,” via its Arizona servers, potential

adoptive parent profiles of married husbands and wives only.

Plaintiffs on the other hand argue that defendants’ combined physical and virtual

presence in California is substantial and significant, warranting application of California law

in the present case. They contend that defendants should not be permitted to escape

liability for injury they have caused simply because their offices are physically located in

another state, and note that the court previously rejected defendants’ assertion that all the

actions of which plaintiffs complain occurred in Arizona, and that the court found that

plaintiffs’ claims arise directly from defendants’ California-related contacts. 

Where an out-of-state business solicits California customers and does business with

customers living in California, California has an interest in ensuring that the out-of-state

business does not discriminate against the California customers. Contrary to defendants’

arguments, this is not a case that involves extraterritorial application of California law, as

did the case against the Hawai’ian hotel in Archibald; or the case against Greyhound based

on the incident at the Texas bus terminal in Chaplin; or the case against the insurance

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 40 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

41

company in Auto Dismantlers. 

Archibald and Chaplin were brought by California residents seeking the protections

of the Unruh Act in connection with events occurring when the California residents were

physically located in other states. Auto Dismantlers involved an attempt to apply California

law to the dismantling of automobiles outside of California’s borders. By contrast,

defendants in this case discriminated against California residents in California – not in

Arizona or in any other state. Plaintiffs in this case were not in Arizona when the Gwilliams

and the Adoption.com partnership refused to do business with them. As residents of

California, they have been present in California from October 2002 until the present. 

Defendants have not cited any case in which a court has declined to apply California law to

an out-of-state business that intentionally solicits California customers and intentionally

harms California residents in California, in violation of California law. 

In Kearney, SSB also argued that the plaintiffs there were seeking to impose

California law on activities conducted outside of California, as to which California had no

legitimate or sufficient state interest. The California Supreme Court rejected SSB’s

argument, stating that the case was based on SSB’s policy and practice of recording

telephone calls of California clients, while the clients were in California, without the clients’

knowledge or consent; and held that California had an interest in protecting the privacy of

telephone conversations of California residents while they were in California that was

sufficient to permit California to exercise legislative jurisdiction over such activity. Kearney,

39 Cal. 4th at 104-05. 

The Kearney court distinguished the situation in which California law is applied to

out-of-state businesses to protect California residents while they are in California, from the

situation in which California “would be applying its law in order to defeat a defendant’s

conduct in another state vis-à-vis another state’s residents” or to “alter [a company’s]

nationwide policy.” Id. at 104. 

Plaintiffs argue that the same reasoning applies in the present case, because the

Butlers’ claim is based on defendants’ acknowledged policy and practice of applying its

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 41 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

42

discriminatory policy to California residents, while such residents were in California. They

claim that just as in Kearney, defendants’ conduct here constitutes a “multi-state event” in

which a crucial element – denial of services to California residents – occurred in California

after defendants engaged in substantial and continuous efforts to attract California

consumers. 

The Kearney court found, with regard to the impairment of California’s interest, that

the failure to apply California law in that case would “substantially undermine the protection

afforded by the statute” because it would permit out-of-state companies doing business in

California to invade the privacy of California residents in contravention of California law. 

Many companies who do business in California are national or international

firms that have headquarters, administrative offices, or – in view of the recent

trend toward outsourcing – at least telephone operators located outside of

California. If businesses could maintain a regular practice of secretly

recording all telephone conversations with their California clients or customers

at which the business employee is located outside of California, that practice

would represent a significant inroad into the privacy interest that the statute

was intended to protect. 

Id. at 126. 

The court finds that the failure to apply California law in the present case would

undermine the Unruh Act for the same reasons. If businesses with headquarters in other

states could maintain a regular practice of discriminating against California residents, that

practice would substantially impair the protection afforded by the statute. 

The court is not persuaded by defendants’ argument that Arizona’s interests would

be seriously impaired by applying California law. In Kearney, the court found that because

California law was more protective of privacy interests than the comparable Georgia

statute, “the application of California law would not violate any interest protected by

Georgia law.” Id. at 126-27. Moreover, the court noted, because there was “nothing in

Georgia law that requires any person or business to record a telephone call without

providing notice to the other parties to the call, . . . persons could comply with Georgia law

without violating any provision of Georgia law.” Id. at 127. 

Similarly, in the present case, the Unruh Act is more protective of consumers than

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 42 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

43

the comparable Arizona law. Application of California law would not violate any right

protected by Arizona law, and the Unruh Act merely provides protections in addition to

those specifically enumerated protections in Arizona. Arizona law does not require, or even

permit, discrimination by businesses against same-sex couples. 

Thus, defendants can comply with California law while doing business in California

without violating any provision of Arizona law, and any interest Arizona may have in its own

law would not be seriously impaired by the application of California law. As in Kearney,

where the court found that it would be feasible for a business located outside California to

identify the calls that its employees were making to California residents, or were taking from

California residents, it would be feasible in the present case for defendants to identify those

potential customers of ParentProfiles.com who were living in, and certified to adopt in,

California. 

In a final argument, defendants contend that applying California law to regulate the

policies of foreign Internet businesses would be a direct regulation of interstate commerce

(citing American Civil Liberties Union v. Johnson, 194 F.3d 1149, 1160-61 (10th Cir. 1999);

American Booksellers Found. v. Dean, 342 F.3d 96, 102, 104 (2d Cir. 2003); PSINet, Inc. v.

Chapman, 362 F.3d 227, 239-40 (4th Cir. 2004)). They claim that there is no justification

for permitting one state to exert such control over the Internet. 

Defendants raised this same argument in their original motion to dismiss, filed in

April 2004. In the order denying that motion, the court specifically distinguished the cases

cited by defendants in this motion – American Booksellers Found. v. Dean, ACLU v.

Johnson, and PSINet v. Chapman – on the basis that each of those cases dealt with

statutes that addressed Internet activities – specifically, laws prohibiting the dissemination

of material harmful to minors via the Internet. The court then noted that, by contrast, the

Unruh Act is an anti-discrimination statute that contains no reference to Internet-content

distribution, and thus, on its face, places no burden on interstate commerce. See Order,

May 3, 2004, at 17-18. 

Moreover, defendants have provided no evidence that the application of California

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 43 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

44

law would pose an undue and excessive burden on interstate commerce by making it

impossible or infeasible for defendants to comply with the requirements of the Unruh Act

without altering their conduct with regard to ParentProfiles.com’s non-California clients. 

In Kearney, the application of California law to the out-of-state defendant was

“limited to the defendant’s surreptitious or undisclosed recording of words spoken over the

telephone by California residents while they are in California.” Kearney, 39 Cal. 4th at 104. 

As plaintiffs point out, the same geographic limitation applies in the present case, as they

are seeking to prevent defendants from discriminating against California residents while

they are in California. The evidence shows that defendants already require all persons who

wish to use the ParentProfiles service to identify their state of residence and where they are

certified to adopt. Thus, defendants can easily distinguish California residents from others,

and the application of California law will not require defendants to alter their policy or

practice with regard to residents of other states.

2. The Unruh Act Claims

Plaintiffs allege in the second amended complaint that defendants’ refusal to offer

same-sex domestic partners the adoption-related services on ParentProfiles.com, on the

same terms and conditions offered married couples, constitutes unlawful discrimination on

the basis of marital status, sexual orientation, and sex, in violation of the Unruh Act. 

Plaintiffs seek summary judgment on the issue of liability against Dale Gwilliam,

Nathan Gwilliam, Adoption.com (the partnership), and Adoption Profiles, LLC. Defendants

also seek summary judgment, arguing that Adoption.com (the partnership) did not violate

the Unruh Act in 2002, and that the injunctive relief sought by plaintiffs under the Unruh Act

is unconstitutional. 

a. Liability under the Unruh Act

Plaintiffs argue that the Adoption.com partnership, and Dale Gwilliam and Nathan

Gwilliam as general partners, were directly liable for violating the Unruh Act in 2002

because the partnership was the owner of the ParentProfiles.com website when plaintiffs

were denied access to the ParentProfiles services. Plaintiffs assert that Adoption Profiles

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 44 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

45

LLC is directly liable for the continuing violation of the Unruh Act as the current owner of

ParentProfiles.com, which continues to discriminate against the plaintiffs and other samesex couples, and that Dale and Nathan are also liable for discriminating against plaintiffs in

connection with their role as managers of Adoption Profiles LLC. 

i. marital status

Defendants argue that plaintiffs’ application was denied solely because they were

not married, and that plaintiffs were treated no differently than other unmarried couples who

sought to post their profiles on ParentProfiles.com. They also assert that the Adoption.com

partnership cannot be liable for discrimination on the basis of marital status in connection

with the October 2002 denial of plaintiffs’ application because the Unruh Act did not prohibit

marital status discrimination against registered domestic partners until January 1, 2005.

Plaintiffs contend, however, that defendants’ refusal to provide equal benefits and

services to registered domestic partners discriminates on the basis of marital status, and

did so in October 2002. They argue that the distinction made by the Koebke court between

pre-2005 and post-2005 conduct does not apply in this case because the plaintiffs there

were not registered domestic partners at the time the defendant country club initially denied

their request for equal access to the services provided to married members. 

They also assert that marital status has been a protected category under the Unruh

Act for well over two decades. In support, they cite to Marina Point, in which the California

Supreme Court cited an opinion of the California Attorney General stating that

discrimination in rental housing on the basis of occupation, marital status, and number of

children would violate the Unruh Act. See Marina Point, 30 Cal. 3d at 736 (citing 58 Ops.

Cal. Atty. Gen. 608, 613 (1975)). 

In Kearney, the California Supreme Court found that California law applied under the

facts of the case. However, with regard to the question of damages for conduct pre-dating

the court’s decision on the choice-of-law question, the court found that it would “maximize

each affected state’s interest to the extent feasible” to restrain the application of California

law with regard to the imposition of liability for acts that occurred in the past in order to

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 45 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

46

accommodate Georgia’s interest in protecting persons who acted in Georgia in reasonable

reliance on Georgia’s law from being subjected to liability on the basis of such an action. 

Kearney, 39 Cal. 4th at 128-31. 

 The court based its decision not to apply California law to SSB’s past actions on two

considerations. The court noted the existence of conflicting lower court decisions from

various jurisdictions, which might have given SSB cause to believe that Georgia law would

apply to the recording of a telephone conversation between a person in Georgia and a

person in California. The court also found that the damages for invasion of privacy might

prove difficult to calculate. 

Plaintiffs argue that the facts in this case do not warrant a result similar to the result

in Kearney, because there are no conflicting decisions on point from other states. They

contend that the relevant facts in this case are more like the facts in Bernhard, where the

court found that California’s dramshop-liability law applied to impose liability on a Nevada

tavern owner who had served alcohol to an intoxicated patron, after that intoxicated

individual injured a California resident in an automobile accident in California. The court’s

ruling was based in part on a finding that the tavern owner had actively solicited California

patronage. Bernhard, 16 Cal. 3d at 322-23. 

Plaintiffs also assert that unlike the uncertain and potentially massive damages at

issue in Kearney, plaintiffs’ damages under the Unruh Act are set by statute and are

minimal in the context of this dispute. In addition, they contend, unlike the violations of

California law alleged in Kearney, the violations in this case are ongoing, as defendants

have refused to alter their discriminatory policy, which they continue to apply to the Butlers

and to other California residents. Plaintiffs contend that awarding damages will have a

deterrent effect, but will not significantly impair any Arizona interest. 

Defendants maintain that their consistent practice of requiring all customers to agree

to Arizona law and venue limits the foreseeability of being subjected to liability under

California law for actions that are lawful under Arizona law. They claim that Arizona’s

interest in protecting Arizona companies from liability for reasonable reliance on Arizona

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 46 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

47

law could certainly by impaired if California law were applied in this case. 

The question as the court sees it, however, is not whether defendants in this case

should have reasonably relied on Arizona law. Unlike the dispute in Kearney regarding the

application of the California statute, this case presents no conflicting decisions on point

from other jurisdictions. As plaintiffs point out, the relevant facts in this case are more like

the facts in Bernhard. Defendants in this case have actively sought business connections

with Californian consumers, and as of October 2002, their Internet business was more

closely tied to California than to any other state (based on the profiles posted by residents

of various states). California has a strong interest in regulating defendants’ activities

because of defendants’ penetration into the California economy, and the likelihood of

exposure for violating California law was a foreseeable and reasonable business expense. 

As explained in some detail above, the question whether the Unruh Act prohibited

marital status discrimination was not completely resolved in 2002. In 2005, however, the

California Legislature clearly stated its agreement with the California Supreme Court’s

rulings, going back 35 years, that the categories listed in the Unruh Act should be

considered illustrative rather than restrictive; and also “affirmed” that the bases of

discrimination prohibited by the Unruh Act include marital status and sexual orientation. 

Defendants assert that plaintiffs’ application to post their profile was denied in

October 2002 pursuant to a policy that only opposite-sex married couples should be

permitted to use the ParentProfiles service. They claim that this policy was applied evenly

and was not personal to plaintiffs. The court finds that there is a triable issue as to whether

the policy of not allowing unmarried couples to post profiles on ParentProfiles.com amounts

to marital status discrimination.

The court finds, given the status of California law in 2002, that defendants should not

be subjected to damages for marital status discrimination in connection with their rejection

of plaintiffs’ application. However, the claim for injunctive relief can go forward.

ii. sexual orientation

Defendants argue that there is no evidence that their “married-couples-only” policy

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 47 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12 Defendants also attempt to distinguish Koebke on the basis that the policy of the

country club was solely commercial, whereas the “editorial policy” of the defendants is to

promote adoption by heterosexual married couples, and is based on the defendants’ protected

rights to freedom of thought, conscience, religion, belief, and expression, which they assert are

recognized defenses under the Unruh Act. In support, they cite North Coast Women’s Care

Med. Group, Inc. v. Superior Court, 40 Cal. Rptr. 3d 636 (2006). The California Supreme

Court granted review in that case on June 14, 2006, however, and the opinion therefore cannot

be cited. See North Coast Women’s Med. Group, Inc. v. Superior Court, 139 P.3d 1, 46 Cal.

Rptr. 3d 605 (Cal. 2006). In addition, plaintiffs assert that defendants denied in their

depositions that their policy is based on their religious or philosophical beliefs.

48

discriminated on the basis of sexual orientation. They contend that their “editorial policy”

focusing on adoption by married couples cannot be used to infer an intent to discriminate

because it disparately impacts same-sex couples, because the Unruh Act prohibits only

intentional discrimination. They also claim that Adoption Profiles LLC has legitimate

business reasons for its policy; and that the ParentProfiles.com website is not a “business

establishment” because it is a vehicle for “publishing” the Gwilliams’ opinion that children

should be adopted by heterosexual married couples only.12 

In response, plaintiffs contend that defendants are operating a public business, and

do not have the option under the Unruh Act to violate the law based on their own beliefs.

The also assert that defendants’ allegedly neutral policy was and is applied in a

discriminatory manner. They argue that the policy was applied in a discriminatory fashion

in 2002, by virtue of the fact that defendants made exceptions to their policy for single

people, but not for same-sex couples. They also assert that defendants have admitted that

they do not provide services to gays and lesbians. 

The court is not persuaded by defendants’ claim that ParentProfiles.com is not a

“business establishment.” As described herein, the ParentProfiles.com website is plainly a

business establishment as defined under California law. See Isbister, 40 Cal. 3d at 78-79

(in enacting the Unruh Act, the Legislature intended that “business establishments” be

interpreted in the broadest sense reasonably possible). 

With regard to the claim that Adoption Profiles LLC has legitimate business reasons

for its “married-couples-only” policy – which the court notes appears to conflict with the

claim that ParentProfiles.com is not a “business establishment” – the court finds that

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 48 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

49

defendants have not actually articulated any such legitimate business reason. 

Defendants assert that the Gwilliams believe it is in the best interests of infants to be

placed for adoption with a married mother and father, and that anyone involved in adoptionrelated activities should act in the best interests of children. This is not a “business

reason.” The Gwilliams and the Adoption.com partnership were not in the business of

arranging adoptions in 2002, and Adoption Profiles LLC has not been in that business

during the period beginning in January 2003. Defendants sell products and services that

are of interest to people who are seeking to adopt or who have recently adopted, but their

own beliefs regarding the suitability of certain prospective parents over others have little

relevance to the conduct of their business. 

With regard to the merits of the claim of discrimination on the basis of sexual

orientation, defendants are correct that a claim of disparate effect cannot proceed under

the Unruh Act. Thus, to the extent that plaintiffs may be arguing that defendants’ marriedcouples-only policy is facially discriminatory because it has the effect of discriminating on

the basis of sexual orientation, that claim is barred. See Koebke, 36 Cal. 4th at 853-54;

Harris, 52 Cal. 3d at 1170-74.

With regard to disparate treatment on the basis of sexual orientation – the claim that

the Gwilliams and Adoption.com (the partnership) rejected plaintiffs’ application to post their

profile on ParentProfiles.com because plaintiffs are not heterosexual, and that Adoption

Profiles continued the policy for the same reason after January 2003 – the court finds that

disputed issues of material fact preclude summary judgment, and that the claim must be

tried to a jury. For example, the evidence suggests that the policy may not have been

applied evenly; and also raises questions with regard to whether the Gwilliams developed

the “married-couples-only” policy because they are biased toward gays and lesbians, and

whether the employees of the Adoption.com partnership and the LLCs advocated and

enforced the defendants’ policy with a discriminatory motive.

iii. sex

Defendants argue that there is no evidence in the record showing that they treated

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 49 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

50

men and women unequally. They submit that no California court has ever found sex

discrimination under the Unruh Act absent evidence of preferential treatment of one sex

over the other. 

Plaintiffs assert, however, that by mandating that each of the individual prospective

parents be in a relationship with a person of the opposite sex, defendants have

discriminated on the basis of the sex of the person with whom each of the individuals

associates. 

There is no dispute that the Unruh Act has long prohibited discrimination on the

basis of sex. However, the court is hard-pressed to find any distinction between the sex

discrimination claim as described by plaintiffs in their own motion and in their opposition to

defendants’ motion, and the claim that defendants discriminated against plaintiffs based on

sexual orientation. To the extent that plaintiffs are able to articulate a difference, this claim

may also be tried to the jury. 

b. Propriety of Injunctive Relief

Defendants argue that the injunctive relief sought by plaintiffs is not appropriate for

two reasons. They contend that the proposed injunction would violate their constitutional

rights, and that plaintiffs cannot obtain an injunction based on the 2005 amendment to the

Unruh Act because there has been no ongoing relationship between plaintiffs and

defendants since plaintiffs’ application was rejected in October 2002.

With regard to the constitutional argument, defendants assert that plaintiffs are

seeking to use California law to compel Adoption Profiles LLC to accept for “publication” on

its websites adoption information that is inconsistent with the purposes for which the

website is operated, which defendants claim is to promote adoption by married husband

and wife couples. Defendants argue that using the courts to compel a “private publisher” to

“grant access to its Internet publications” for the speech of another private party violates the

free speech protections of the California Constitution and the First Amendment to the

United States Constitution. 

Defendants contend that this issue is controlled by the U.S. Supreme Court’s

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 50 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

51

decision in Hurley v. Irish-American Gay, Lesbian and Bisexual Group of Boston, 515 U.S.

557 (1995). In that case, the Irish-American Gay, Lesbian and Bisexual Group of Boston

sued for sexual orientation discrimination under a Massachusetts law similar to the Unruh

Act, after the organizers of a private St. Patrick’s Day parade refused to let the group march

in their parade. The Massachusetts state court ruled in the plaintiff group’s favor, but the

U.S. Supreme Court found that the compelled inclusion of the group unconstitutionally

interfered with the freedom of expression of the private parade organizers.

Defendants claim that compelling them to post plaintiffs’ profiles on their “web

publication” ParentProfiles.com would similarly constitute compelled speech, and would

also interfere with their constitutional right to decide what not to say. They argue, in

essence, that their website ParentProfiles constitutes “expressive speech,” and that just as

a newspaper cannot be compelled to publish particular writings by outsiders, defendants

cannot be compelled to publish plaintiffs’ “writings.” 

Defendants maintain that the fact that they accept money for posting the profiles

does not change the analysis, because newspapers also accept money for printing

advertisements, but cannot be compelled to accept every advertisement that anyone wants

to have printed. They claim that the speech on the ParentProfiles.com website is not

commercial speech because it does not propose commercial transactions (as accepting

money for adoptions would constitute the unlawful selling of babies). They assert that civil

rights laws cannot be used to compel people to change their speech.

In response, plaintiffs argue that defendants do not have a First Amendment right to

engage in discriminatory conduct, and that statutes prohibiting discrimination in public

accommodation do not violate the First Amendment because they are not aimed at the

suppression of speech. They contend that the Unruh Act affects what defendants must do

to engage in business activities in California – refrain from engaging in discrimination – not

what defendants may say or not say regarding their beliefs about gay people, adoption,

marriage, or parenting. They claim the Unruh Act does not require defendants to espouse

or denounce any particular viewpoint, but rather to refrain from discriminatory conduct. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 51 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

52

Plaintiffs contend that under defendants’ view, any business that claimed ideological

opposition to serving women, African-Americans, gays and lesbians, or people with

disabilities would be entitled to do so on First Amendment grounds, simply by asserting that

they wished to “send a message.” Plaintiffs assert that if defendants’ position were correct,

it would eviscerate governments’ ability to eliminate discrimination. 

Finally, plaintiffs argue that any speech that is incidentally affected by application of

the Unruh Act is commercial speech at best, and note that commercial speech does not

receive the same level of constitutional protection as other types of protected speech. 

Plaintiffs claim that the only expression by defendants on ParentProfiles.com is related to

the commercial advertising services they provide to prospective parents, and that any

conduct or decision associated with such speech is properly considered commercial

speech.

The court finds that defendants’ argument is without merit. The defendants in the

present case are selling adoption-related services. It is undisputed that none of the

defendants is a licensed adoption agency, and that none of the defendants is authorized by

any state to pass on the fitness of any person to become an adoptive parent. The

Gwilliams operate various adoption-related commercial enterprises via the Internet. Some

of these enterprises offer information and advice regarding adoption to Internet users

without charge. Others offer adoption-related merchandise for sale. 

The website ParentProfiles.com is not “expressive speech.” It is a commercial

enterprise, consisting of a website where prospective parents post profiles for a fee. 

Indeed, ParentProfiles.com is more akin to a commercial Internet dating service than it is to

an Internet “publication.” The “service” requires that the prospective parents be preapproved for adoption by the appropriate agency in their own states of residence, but apart

from that, it operates as any matchmaking service. Just as the operators of Internet dating

services do not schedule dates or perform marriages, but rather simply provide interested

individuals with a vehicle for making contact and arranging introductions, the operators of 

ParentProfiles.com do not preside over meetings between birth mothers and prospective

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 52 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

53

adoptive parents, and do not broker or arrange any adoptions. The website simply

provides an opportunity for prospective parents – for a fee – to post information about

themselves on a website in the hope that a birth mother will select them as the adoptive

parents for their babies.

Nor is it “undisputed” that defendants are “Internet publishers.” The language in the

profiles that are posted on the site is not defendants’ language – it is the language of

defendants’ paying customers. Simply “publishing” information written by prospective

parents does not suffice to transform defendants’ discriminatory conduct into “speech

itself.” Plaintiffs are not seeking to place any restrictions on what defendants are permitted

to say or to compel them to say anything. It is the discriminatory conduct that is at issue

here – defendants’ refusal to do business with plaintiffs, based on their sexual orientation

and/or marital status. The key component of defendants’ business is the selling of

adoption-related services to the public, and the fact that there may be some speech

involved in that business does not entitle them to First Amendment protection. 

The Supreme Court found that the organizer of the parade in Hurley was an

expressive organization carrying on an expressive activity. The Court made clear,

however, that anti-discrimination laws do not, as a general matter, violate the First or

Fourteenth Amendments, because such laws generally do not “target speech” but rather

prohibit “the act of discriminating.” Hurley, 515 U.S. at 572; see also Roberts v. U.S.

Jaycees, 468 U.S. 609, 623-24 (1984) (statutes prohibiting discrimination in public

accommodation do not violate the First Amendment because they are not aimed at

suppression of speech). Defendants cite no reported decision extending the holding of

Hurley to a commercial enterprise carrying on a commercial activity. 

The Supreme Court recently further clarified the distinction between regulating

conduct and speech in Rumsfeld v. Forum for Acad. and Inst. Rights, Inc., 547 U.S. 47, 126

S.Ct. 1297 (2006), where it rejected the argument that a federal law requiring law schools

to give access to military recruiters violated the schools’ First Amendment rights. 

Commenting that “[l]aw schools remain free under the statute to express whatever views

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 53 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

54

they may have on the military’s congressionally mandated employment policy,” the Court

found that, as a general matter, the federal law at issue “regulates conduct, not speech.” 

Id., 126 S.Ct. at 1307.

Moreover, even if the ParentProfiles.com website were deemed to have some

expressive component, defendants still cannot prevail in their First Amendment argument. 

Under the test set forth in United States v. O’Brien, 391 U.S. 367 (1968), a governmental

regulation that places a burden on expressive activity is sufficiently justified if it is within the

constitutional power of the government, if it furthers an important or substantial

governmental interest, and if the incidental restrictions on alleged First Amendment

freedoms are no greater than is essential to the furtherance of that interest. Id. at 377. In

this case, California has the constitutional authority to bar discrimination on the basis of

sexual orientation in public accommodations, California’s interest in combating

discrimination on the basis of sexual orientation is compelling, and the Unruh Act prohibits

such discrimination in order to eliminate the harms caused by the discriminatory conduct,

not to silence particular viewpoints. 

Defendants’ second argument is that plaintiffs cannot state a present cause of action

for injunctive relief with regard to the claim of marital status discrimination. They assert that

an injunction based on a change in law presumes the existence of an ongoing relationship

over which the court has jurisdiction, but where, as here, the rejection of plaintiffs’

application was not unlawful in October 2002, and there was no ongoing relationship

between plaintiffs and the defendants, plaintiffs cannot obtain injunctive relief. 

In support, defendants cite White v. Davis, 13 Cal. 3d 757 (1975), and American

Fruit Growers v. Parker, 22 Cal. 2d 513 (1943). In White, the plaintiff – a University of

California history professor and a taxpayer – filed a taxpayer’s suit to enjoin the Chief of the

Los Angeles Police Department from spending public funds in connection with the police

department’s conduct of covert intelligence gathering activities at UCLA. Among other

things, the complaint alleged that the challenged conduct violated students’ and teachers’

constitutional right to privacy. Shortly after the trial court sustained the defendant’s

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 54 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

55

demurrer, the voters amended Article I, Section 1 of the California Constitution to provide

explicit protection to every individual’s interest in “privacy.” 

The court of appeal noted that although the new constitutional provision had not

been adopted until after the filing of the lawsuit, the complaint nonetheless stated a prima

facie violation of the constitutional right of privacy. White, 13 Cal. 3d at 776. The court

found the provision controlling on the appeal because the complaint sought only injunctive

relief to restrain the continuation of the alleged surveillance and data collecting practice in

the future. The court cited American Fruit Growers for the proposition that “[r]elief by

injunction operates in futuro, and the right to it must be determined as of the date of the

decision by an appellate court.” White, 13 Cal. 3d at 773 n.8 (citing American Fruit

Growers, 22 Cal. 2d at 515). 

The court does not agree that the principle stated in White bars plaintiffs’ claim for

injunctive relief in this case. White does not stand for the proposition that an injunction

based on a change in law presumes the existence of an ongoing relationship over which

the court has jurisdiction. White simply holds that an appellate court must apply the law in

effect at the time it issues its opinion in a case.

3. Unfair Competition and Misleading Advertising Claims

The court finds that both claims brought under California Business & Professions

Code must be dismissed. Plaintiffs have indicated their intention to dismiss the claim

brought under § 17500, and the § 17200 claim must be dismissed for lack of standing. 

California law previously permitted any person acting for the general public to sue for

relief from unfair competition. See Californians for Disability Rights v. Mervyn’s, LLC, 39

Cal. 4th 223, 227 (2006). Proposition 64, which was passed by the voters on November 2,

2004, amended California’s unfair competition law to require that any plaintiff have

“suffered injury in fact and [have] lost money or property as a result of . . . unfair

competition.” Cal. Bus. & Prof. Code § 17203, as amended by Prop. 64 § 2; Id. § 17204,

as amended by Prop. 64 § 3. In CDR, the California Supreme Court held that these new

requirements apply to cases pending at the time the proposition became effective. CDR,

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 55 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

56

39 Cal. 4th at 232-33.

Defendants argue that the California Supreme Court’s decision in CDR eliminates

plaintiffs’ unfair competition claim. Defendants contend that it is undisputed that plaintiffs

have not “lost money or property as a result of” any conduct at issue in this litigation, noting

that neither the first amended complaint nor the second amended complaint contains any

such allegation, and that plaintiffs have never produced any evidence showing that they

“lost money or property as a result of” defendants’ actions. 

In response, plaintiffs argue that while Proposition 64 eliminated the standing of

certain plaintiffs to bring unfair competition claims, it did not affect their standing in this

case. Plaintiffs argue that even though the California Supreme Court has ruled that

Proposition 64 is retroactive, plaintiffs – as injured parties here – can still pursue their

claims as individuals (rather than as private attorneys general). Plaintiffs assert that they

do not plan to seek class certification in this case and intend to seek an injunction based on

their personal injury. 

Plaintiffs submit that unlike the plaintiffs in CDR, and its companion case, Branick v.

Downey Sav. & Loan Ass’n, 39 Cal. 4th 235 (2006) – none of whom could allege any direct

personal injury as a result of the actions of the defendants in those cases – they (plaintiffs

here) have been injured by defendants’ business practices, and thus have standing to sue

to enjoin those practices. 

Plaintiffs contend that they have suffered both “injury in fact” and a “loss of money or

property” as a result of defendants’ conduct. Plaintiffs claim that they have been injured in

fact by defendants’ unlawful denial of access to defendants’ business services and their

false and misleading statements regarding those services, and that they continue to suffer

the ongoing stigmatizing injury that defendants’ actions have caused. 

Plaintiffs also note that while they seek statutory damages rather than compensatory

damages, they did expend time and money preparing and submitting their application to

defendants, only to have defendants refuse to allow them to use defendants’ business

services. They contend that this economic loss is sufficient to support standing under 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 56 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

57

§ 17200. 

The court finds, however, that plaintiffs do not have standing to assert the 

§ 17200 claim. The court agrees with defendants, who argue that statutory damages

cannot be considered a “loss of money or property.” As defendants point out, plaintiffs

have not previously identified any loss of money or property in connection with their unfair

competition claims, and cannot now attempt to establish such a loss. Plaintiffs have

previously taken the position that they should not be required to respond to deposition

questions regarding damages, for the reason that they had disclaimed any claim to

damages other than the statutory minimum. 

Moreover, plaintiffs’ expenditure of time and money preparing an application is not

the kind of loss of money or property that is necessary for standing under the new version

of the unfair competition law. Restitution, which is the only monetary recovery possible

under § 17200, involves the payment or return of money or property that belongs to the

plaintiff. See, e.g., Montecino v. Spherion Corp., 427 F.Supp. 2d 965, 967 (C.D. Cal.

2006). The time and expenditure of preparing the application to ParentProfiles is not the

type of loss of money or property that is necessary for standing under § 17200.

4. Successor Liability and Alter Ego

a. Plaintiffs’ Allegations as to Successor Liability and Alter Ego

Plaintiffs allege in the second amended complaint that Adoption Media LLC and

Adoption Profiles LLC are the successors-in-interest of Adoption.com (the partnership) and

its general partners Dale and Nathan Gwilliam. They also assert that each defendant is the

alter ego of the other defendants. 

In October 2002, when defendants refused to post plaintiffs’ profile on

ParentProfiles.com, the general partnership Adoption.com, consisting of Dale and Nathan,

owned the vast majority of the adoption-related websites operated by the Gwilliams. 

Between that time and June 2003, Dale and Nathan created the two LLCs, transferred

ownership of the partnership’s websites to the LLCs (while leaving the partnership in

place), created the corporations, and transferred the membership interests in the LLC’s

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 57 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

58

from themselves, as sole members of the LLCs, to the corporations. 

Plaintiffs assert that in so doing, defendants erected a complex array of corporate

structures that involve only two people – Dale Gwilliam and Nathan Gwilliam. Plaintiffs

allege that the two LLCs are the successors-in-interest of the Adoption.com partnership

and its partners. Plaintiffs assert that the LLCs received two vital assets from the general

partnership – the Adoption.com website and the ParentProfiles.com website. They note

that Dale and Nathan, the sole general partners of the general partnership, were also at

that time the sole members and officers of the LLCs, and claim that this resulted in a mere

continuation of ownership and control over day-to-day operations of all broad policy

decisions regarding the websites.

Plaintiffs also argue that the business entity defendants are all alter egos of the

Gwilliams because the Gwilliams have failed to maintain the separateness among the

various entity defendants, and have often confused the various entities. Plaintiffs assert

that it was the intent of the Gwilliams to create a business structure in which no single entity

or individual can be held responsible for the October 2002 decision not to allow plaintiffs to

post their profile on ParentProfiles.com, or for the current policy of not allowing same-sex

couples to post on ParentProfiles.com. 

b. Defendants’ Motion

Defendants seek summary judgment on the claims of successor and alter ego

liability. Both plaintiffs and defendants argue, however, that an inquiry into successor and

alter ego liability would be superfluous – though for different reasons. Plaintiffs contend

that there is no need to consider successor and alter ego liability because four of the

defendants – Dale Gwilliam, Nathan Gwilliam, Adoption.com (the partnership), and

Adoption Profiles LLC – are directly liable for violations of the Unruh Act. Plaintiffs claim

that each of these defendants affirmatively made the decision to discriminate in violation of

the Unruh Act because of their consistent application of the discriminatory policy and

express rejection of same-sex couples. 

Defendants, on the other hand, contend that the inquiry would be superfluous

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 58 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13 Here, of course, it was the assets of the Adoption.com partners which were

transferred to the LLCs. 

59

because the court does not have personal jurisdiction over any defendant. They assert that

in its previous orders, the court merely found personal jurisdiction as to “defendants,” and

that plaintiffs made no showing to justify a finding of personal liability as to any specific

defendant. Defendants also argue that if plaintiffs cannot establish that Adoption Profiles

LLC is the successor in liability to, or the alter ego of, the Adoption.com partnership, they

cannot establish personal jurisdiction over Adoption Profiles LLC, and cannot obtain the

injunctive relief they seek.

i. successor liability

Defendants assert that plaintiffs cannot establish successor liability because neither

Adoption Media LLC nor Adoption Profiles LLC is a successor to the Adoption.com 

partnership. Under California law, when one corporation sells or transfers all its assets to

another corporation, the latter is not liable for the debts and liabilities of the transferor

unless one of four exceptions applies:13

(1) there is an express or implied agreement of assumption, (2) the

transaction amounts to a consolidation or merger of the two corporations, (3)

the purchasing corporation is a mere continuation of the seller, or (4) the

transfer of assets to the purchaser is for the fraudulent purpose of escaping

liability for the seller’s debts.

Ray v. Alad Corp., 19 Cal. 3d 22, 28 (1977). Defendants argue that neither Adoption Media

LLC nor Adoption Profiles LLC falls within any of these exceptions to the general rule

against successor liability. 

With regard to the first exception, defendants contend that there is no express or

implied agreement of assumption – that the partnership expressly retained liability, and the

transfer of assets from the partnership to Dale and Nathan and from Dale and Nathan to

the LLCs expressly disclaimed any intent to transfer liability. 

With regard to the second exception, defendants contend that courts recognize de

facto mergers only when four conditions apply:

(1) there was a continuation of the enterprise of the seller in terms of

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 59 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

60

continuity of management, personnel, physical location, assets, and

operations; (2) there is a continuity of shareholders [accomplished by paying

for the acquired corporation with shares of stock]; (3) the seller ceases

operations, liquidates, and dissolves as soon as legally and practically

possible; and (4) the purchasing corporation assumes the obligations of the

seller necessary for the uninterrupted continuation of business.

See Louisiana-Pacific Corp. v. ASARCO, Inc., 909 F.2d 1260, 1264 (9th Cir. 1990); see

also Marks v. Minnesota Mining and Mfg. Co., 187 Cal. App. 3d 1429, 1436 (1986) (de

facto merger where original business became a part of defendant, corporation ceased to

exist, and result was the same as a statutory merger). Defendants argue that this

exception does not apply because the Adoption.com general partnership still exists and still

has assets, and could readily pay any judgment for the minimum statutory damages at

issue in this litigation.

With regard to the third exception, the “mere continuation” doctrine also requires that

the selling entity dissolve – because only one corporation may remain after the transaction. 

Ferguson v. Arcata Redwood Co., LLC, 2004 WL 2600471 at *5 (N.D. Cal., Nov. 12, 2004);

State of Washington v. United States, 930 F.Supp. 474, 478 (W.D. Wash. 1996). As with

the first exception, defendants contend that because the Adoption.com partnership still

survives and has assets, there can be no successor liability under this exception. 

With regard to the fourth exception, defendants contend that Dale and Nathan made

no effort to escape liability for prior debts or actions, and that there can therefore be no

question of any fraudulent purpose of escaping liability. 

In opposition, plaintiffs assert that successor liability is an equitable doctrine, and

that because of the great variety of factual circumstances in which successorship issues

may arise, and because of the different legal consequences that may be at issue in

different cases, no single, mechanical formula can be devised to resolve all successorship

issues. They argue that because the origins of successor liability are equitable, fairness is

a prime consideration in its application. 

Plaintiffs concede that many California courts have followed the four-part formulation

set forth in the California Supreme Court’s decision in Ray, but argue that courts working

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 60 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

61

within that framework have applied the factors differently. For example, they note, the court

in Franklin v. USX Corp., 87 Cal. App. 4th 615 (2001), observed that “the common

denominator, which must be present in order to avoid the general rule of successor

nonliability, is the payment of inadequate cash consideration.” Id. at 627. Plaintiffs also

contend that some courts have gone outside the “traditional” exceptions, when the case

before them warrants another application of the equitable doctrine to reach an equitable

result. They dispute defendants’ suggestion that successor liability can never be imposed

in the context of partnerships, noting that courts have recognized the existence of

successors-in-interest to a partnership where the facts and equitable considerations

warrant such a finding. 

Plaintiffs argue further that under the traditional successor liability standard,

Adoption Profiles and Adoption Media are liable. They dispute defendants’ assertion that

the “mere continuation” exception does not apply, and cite McClellan v. Northridge Park

Townhome Owners Ass’n, Inc., 89 Cal. App. 4th 746 (2001), for the proposition that

corporations cannot escape liability by a mere change of name or a shift of assets when

and where it is shown that the new corporation is in reality but a continuation of the old. 

In McClellan, a condominium association failed to pay a contractor for repair work. 

When the contractor commenced an arbitration proceeding, the condominium association

created a new homeowners association for the condo complex. A court entered the

arbitration award for the contractor two weeks later, and the original condominium

association filed for bankruptcy two weeks after that. The trial court amended the judgment

to include the new homeowners association, which appealed. 

The appellate court found that the mere continuation exception applied and that the

new homeowners association was liable as a successor because it was a homeowners

association for the same condominium complex, because the same management company

remained in place, and because the new association derived its income from the same

source as the original condominium association – homeowner dues assessed to the

membership. Id. at 756. The court held that successor liability applied even though there

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 61 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

62

was no evidence that the predecessor had been dissolved or had wound up its affairs. Id.

Plaintiffs argue that in this case, Adoption Profiles LLC continues to offer the same

profile posting service as the predecessor general partnership, operates the same website

(ParentProfiles.com), and derives its revenues from the same source – the fee charged to

prospective adoptive parents to use the profile posting service. Plaintiffs claim that the

ParentProfiles.com coordinator responsible for accepting and processing applications to

post on the website was continuously employed in that position from January 2002 to

November 2003 – first by the partnership, then by Adoption Media. Plaintiffs assert that the

fact that the partnership continues to own assets and develop new products is immaterial. 

They argue that the rule articulated in McClellan applies because the Gwilliams have

attempted to frustrate plaintiffs’ right to injunctive relief by a “mere change of name” and a

“shift of assets” from the partnership to Adoption Profiles and Adoption Media, despite the

fact that the new business entities are essentially but a continuation of the old. 

Plaintiffs also assert that courts have applied the fourth Ray exception – the

“fraudulent transfer” exception – to hold a successor business liable for the obligations of a

successor when the transfer of assets occurs “for the fraudulent purpose of escaping

liability.” Ray, 19 Cal. 3d at 28. They claim that California courts have applied this

exception when they find that a transfer of assets is undertaken to escape liability for a

predecessor’s existing or perceived future liabilities. 

Plaintiffs claim that in the present case, defendants attempted to frustrate plaintiffs’

statutory right to injunctive relief, by transferring the assets of the general partnership to two

newly-formed limited liability companies. Plaintiffs note that Nathan and Dale initiated

formation of the LLCs and the asset transfers less than one month after responding to a

letter from plaintiff’s attorney, which had put them on notice of the potential for legal action

to stop their discrimination against same-sex couples. Plaintiffs claim that defendants have

indicated their intent to evade liability by their assertions that Adoption Profiles LLC and

Adoption Media LLC cannot be liable for discrimination because they did not exist at the

time the events at issue in this case occurred. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 62 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

63

Plaintiffs argue further that because they seek an injunction to remedy an ongoing

discriminatory practice, the application of successor liability in the context of other

discrimination statutes is more apt than its application to claims for monetary relief. They

contend that courts analyzing federal laws have held that prospective relief against a

successor is appropriate where the facts indicate that the successor will continue the

predecessor’s practices, including where a successor will continue the predecessor’s

practices, such as a violation of civil rights. They also submit that the key component is

notice by the successor – in other words, while a business cannot be held liable for its

predecessor’s liabilities if it did not assume those liabilities, it can be held to account for the

obligations of a predecessor where it had knowledge of unfair or discriminatory practices by

the predecessor. 

The court finds that under the standard articulated by the California Supreme Court

in Ray, neither Adoption Media LLC nor Adoption Profiles LLC can be considered a

successor to the partnership. There is no evidence of any express or implied agreement of

assumption of debts and liabilities; the conditions required to effectuate a de facto merger

do not apply; the LLCs cannot be considered a “mere continuation” of the Adoption.com

partnership because the partnership still exists in its previous legal form; and there is no

evidence that the Gwilliams transferred the partnership’s assets to the LLCs for the

fraudulent purpose of escaping liability for the debts of the partnership. 

The facts in this case are distinguishable from the facts in McClellan. In McClellan,

the transfer and abandonment of the original homeowners association was deemed invalid

because it had not been accomplished with the required percentage of votes of the

membership. The new association was therefore a mere continuation of the old because

while it was collecting dues from the condominium owners, it did not actually have any

members. See McClellan, 89 Cal. App. 4th at 756. Here, by contrast, the Adoption.com

partnership, which remains legally viable, sold or transferred assets including the

ParentProfiles.com website to the newly created LLCs. While there may have been a

continuation of part of the enterprise of the partnership (the operation of

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 63 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

64

ParentProfiles.com), the partnership itself was not dissolved and the LLCs did not assume

all of the obligations of the partnership. 

ii. alter ego liability 

Defendants also argue that none of the defendants meets the requirements for alter

ego liability. Under California law, a plaintiff seeking to invoke the alter ego doctrine must

establish two elements: that there is a unity of interest and ownership between the

corporation and its equitable owner such that the separate personalities of the corporation

and the shareholder do not really exist; and that there will be an inequitable result if the

acts in question are treated as those of the corporation alone. Sonora Diamond Corp. v.

Superior Court, 83 Cal. App. 4th 523, 538 (2000). 

The alter ego doctrine “arises when a plaintiff comes into court claiming that an

opposing party is using the corporate form unjustly and in derogation of the plaintiff’s

interests.” Mesler v. Bragg Mgmt. Co., 39 Cal. 3d 290, 300 (1985). The alter ego doctrine

prevents individuals or other corporations from misusing the corporate laws by the device

of a sham corporate entity formed for the purpose of committing fraud or other misdeeds.

Assoc. Vendors, Inc. v. Oakland Meat Co., 210 Cal. App. 2d 825, 842 (1962). California

also applies the alter ego doctrine to LLCs. See, e.g., People v. Pacific Landmark, 129 Cal.

App. 4th 1203, 1212 (2005).

Courts have identified a number of factors that may bear on the question whether

there is a unity of interest and ownership. Although no single factor is dispositive, they

include 

the commingling of funds and other assets; the failure to segregate funds of

the individual and the corporation; the unauthorized diversion of corporate

funds to other than corporate purposes; the treatment by an individual of

corporate assets as his own; the failure to seek authority to issue stock or

issue stock under existing authorization; the representation by an individual

that he is personally liable for corporate debts; the failure to maintain

adequate corporate records; the intermingling of individual and corporate

records, the ownership of all the stock by a single individual or family; the

domination or control of the corporation by the stockholders; the use of a

single address for the individual and the corporation; the inadequacy of the

corporation’s capitalization; the use of the corporation as a mere conduit for

an individual’s business; the concealment of the ownership of the corporation;

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 64 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

14 However, True North and Aracaju are both closely-held corporations, as Dale

Gwilliam and his wife own 100% of True North, and Nathan Gwilliam owns 100% of Aracaju.

65

the disregard of formalities and the failure to maintain arm’s-length

transactions with the corporation; and the attempts to segregate liabilities to

the corporation.

Mid-Century Ins. Co. v. Gardner, 9 Cal. App. 4th 1205, 1213 & n.3 (1992) (citation omitted). 

Because no one factor governs, the court should look at all the circumstances to determine

whether the alter ego doctrine applies. Sonora Diamond, 83 Cal. App. 4th at 539. 

Defendants argue, however, that many of those factors do not apply in the case of

an LLC, because the members of the LLC are permitted by statute to actively participate in

the management and control of the company. Defendants also argue that Adoption

Profiles LLC and Adoption Media LLC do not have a unity of ownership and interest with

each other or with the Adoption.com partnership, because Dale and Nathan own the

partnership, while True North and Aracaju own the LLCs.14

In addition, defendants contend that the business operations of Adoption Media LLC

and Adoption Profiles LLC are distinct, with Adoption Media LLC focusing on publishing

adoption-related information, and Adoption Profiles LLC focusing on publishing profiles of

potential adoptive parents for a fee, neither of which business interests are shared by the

Adoption.com partnership. Defendants contend that cases that have found “unity” between

affiliated corporations have involved businesses that were engaged in a joint effort to

accomplish the same purpose. 

Defendants also argue that alter ego liability cannot apply to True North and Aracaju,

because there is no evidence of self-dealing between the corporate defendants, the

Gwilliams, and the LLCs. Defendants contend that the essence of the analysis is whether

the corporate owners have engaged in some sort of self-dealing to the detriment of the

plaintiffs, and argue that there can be no alter ego liability absent some bad faith. 

Moreover, they assert, an inequitable result cannot be demonstrated merely by showing

that a plaintiff is unable to obtain the relief sought without piercing the corporate veil. 

Defendants contend that there is no genuine issue of material fact regarding

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 65 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

66

defendants’ good faith. They claim that the Gwilliams chose to form the LLCs and then

later, to incorporate, for legitimate business reasons, to avoid personal liability for future

corporate obligations, and for various reasons relating to estate planning. They also

contend that the timing of the formation of the LLCs does not raise any inference of bad

faith, asserting that Dale Gwilliam, who is an attorney, attended a CLE seminar on tax

issues for LLCs in June 2002, some four months before plaintiffs attempted to post their

profile in October 2002, and also noting that Dale has stated in his declaration that he and

Nathan made the decision to begin operating as LLCs before September 2002. 

Defendants also assert that when they decided to form the LLCs, and when they denied

plaintiffs’ application to post their profile, they had no reason to believe that they were

violating California law, or that forming the LLCs or later incorporating would eliminate a

remedy (injunctive relief) that a potential claimant might have. 

As for plaintiffs’ assertion that Dale and Nathan’s common ownership of the

Adoption.com partnership, the LLCs, and the corporations supports alter ego liability,

defendants argue that this claim is not supported by California law. Defendants contend

that officers and directors of parent companies routinely serve as officers and directors of

subsidiaries. They assert that corporate entities remain distinct, and argue that a parent

may be involved in the subsidiary’s activities so long as that involvement is consistent with

the parent’s investor status. In sum, they contend that there can be no unity of ownership

between Aracaju and True North, as they are separately owned and have separate

interests – Aracaju being owned by Nathan, and True North being owned by Dale.

Finally, defendants argue that the alter ego doctrine cannot justify an injunction

against the LLCs or the corporate defendants for the Adoption.com partnership’s alleged

violation of plaintiffs’ rights. Defendants assert that plaintiffs’ total damages in this case are

the statutory minimum damages of $24,000, and that plaintiffs can easily recover that

amount from the partnership. They contend that because Adoption.com no longer owns

the ParentProfiles.com website, and no longer engages in the behavior about which the

plaintiffs complain, it will not be possible for this court to grant any injunctive or other

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 66 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

67

preventive relief against the partnership, because there can be no possibility of future injury

where the defendant has ceased owning the business. 

Defendants contend that plaintiffs can seek injunctive relief only on the basis of

current, ongoing activities, and personal jurisdiction for that relief will have to be based on

something other than the contacts that the Adoption.com partnership had with California in

October 2002. In a related argument, they assert that plaintiffs cannot obtain injunctive

relief against Adoption Media, True North, or Aracaju, because there is no evidence that

any of those defendants discriminated against plaintiffs. 

In opposition, plaintiffs argue that the defendants are liable as alter egos. They

contend that California courts state that there is no specific “litmus test” for identifying

whether an individual or entity is an alter ego of another, but that the main concern is

equity. They argue that the equitable remedy of injunction is required in this case to

prevent an inequitable result for the plaintiffs. They dispute defendants’ claim that there

must be a finding of “bad faith” before liability can be imposed on a theory of alter ego. 

They assert instead, that the doctrine is designed to prevent what would be fraud or

injustice if accomplished. 

Plaintiffs contend that California courts have defined “inequitable result” to include a

situation where a corporate entity is used to evade the law or to accomplish some other

wrongful or inequitable purpose. They argue that where a corporation is established to

avoid the effect of a statute, the court may look at factors including the strength of the

policy behind the statutory enactment. They note that California courts have disregarded

the corporate form where an individual attempts to create multiple business entities to

evade coverage of a statute. 

Plaintiffs dispute defendants’ assertion that the doctrine of alter ego cannot apply

because the partnership still exists and can pay any judgment. They note that defendants

rely on cases that sought only monetary damages from the alleged alter ego defendant. 

They argue that plaintiffs can obtain complete relief in this case only by obtaining an

injunction. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 67 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

68

Plaintiffs argue that a finding of alter ego liability is appropriate where, as here, there

is common equitable ownership and control over all companies by the same individuals. In

support, they cite Elliott v. Occidental Life Ins. Co. of Calif., 272 Cal. App. 2d 373 (1969). In

that case, the court upheld the jury’s finding that the Oroweat Baking Company of San

Francisco (a corporation) was an alter ego of the Oroweat Oakland Bakery (a partnership),

where the same three individuals owned all the stock in the corporation and also

constituted the three partners of the bakery. All the baking was done by the San Francisco

company, and the Oakland company acted as the distributor. Both companies were

represented by the same attorney, and the records and correspondence of both companies

was kept in the San Francisco office. Both companies used the same employees and the

same business locations. Id. at 375-77. 

Plaintiffs assert that there is evidence that many of the relevant factors cited by the

Elliott court support a finding of alter ego in this case. First, they note that Dale and Nathan

are each 50% owners of the partnership; that Dale and wife are the sole owners of True

North, and Nathan is the sole owner of Aracaju; and that Dale and Nathan are the

controlling owners of the sole corporate members of Adoption Media LLC and Adoption

Profiles LLC, giving them effective and exclusive control over both LLCs. 

Plaintiffs also contend that the evidence shows, based on defendants’ tax returns

and W-2 statements for employees, that defendants are located at the same business

address and share their employees. Plaintiffs also assert that the ParentProfiles.com

development agreement details the symbiotic relationship between the two LLCs; and that

the defendants’ internal financial documents (general ledger and balance sheets) reveal

that the entities share their assets and liabilities as a normal course of business, thus failing

to maintain arms’-length relationships among themselves. 

Second, plaintiffs argue that Adoption Media, Adoption Profiles, True North, and

Aracaju were all undercapitalized at their formation. Plaintiffs assert that the attempt to do

corporate business without providing a sufficient basis of financial responsibility to creditors

is an abuse of the separate entity and will be ineffectual to shield shareholders from liability. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 68 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

69

They argue that where a corporation is set up with insufficient capital to meet its debts, it

would be inequitable to allow shareholders to escape personal liability by means of such a

flimsy organization. Plaintiffs assert that in light of the volume of business that defendants

conducted, the initial capitalization ($100 from Dale and $100 from Nathan for each of the

LLCs) was inadequate as a matter of law.

Third, plaintiffs also contend that during the first year that the LLCs were in

operation, defendants touted ParentProfiles.com as part of the “Adoption.com Family,”

where millions of pages are visited each month,” and Adoption Media LLC described the

Adoption.com website as “the foremost authority for adoption on the Internet.” 

Fourth, plaintiffs argue that the Gwilliams themselves have disregarded distinctions

among the various defendants, and failed to maintain adequate records because they and

their employees confused the records of the separate entities. For example, plaintiffs claim

that the corporations’ meeting minutes refer to Dale and Nathan in their individual

capacities, rather than as representatives of True North or Aracaju; and that despite the

alleged transfer of the membership of the LLCs into distinct corporations, the LLCs

continued to list Dale and Nathan as “members” of those entities. Plaintiffs also note that

minutes of a special meeting of Adoption Profiles, LLC, held on January 21, 2003, refers to

Adoption Media, LLC, in the body, and that defendants used the Tax ID number for the

Adoption.com partnership to submit filings for Adoption Media LLC. 

Finally, plaintiffs assert that the Gwilliams used the defendant business entities for

their own personal economic benefit, treating the assets of the entities as their own. 

Plaintiffs cite to an incident involving Dale Gwilliam, who attempted to use funds from

Adoption Media LLC to pay a penalty assessed against him by the State Bar of Arizona. 

However, plaintiffs note, because the matter to which the penalty related had occurred prior

to the formation of Adoption Media LLC, he could not rightfully claim that Adoption Media

should be paying fines incurred by its counsel. Plaintiffs claim that this demonstrates

Dale’s willingness to use Adoption Media’s assets as his own and to use them to settle his

personal debts. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 69 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

70

Plaintiffs have provided some evidence suggesting a material dispute with regard to

whether there is a unity of interest and ownership among the Gwilliams and the entity

defendants, although the evidence that Dale and Nathan from time to time may have

disregarded the corporate formalities or disregarded distinctions among the entities is not

particularly compelling under the facts of this case. Where a corporation is closely held, as

True North, Aracaju, and the LLCs appear to be, “the interests of the corporation’s

management and stockholders and the corporation itself generally fully collide.” Gottlieb v.

Kest, 141 Cal. App. 4th 110, 151 (2006). Moreover, lack of formality is not unusual in a

closely-held corporation. See Nelson v. Anderson, 72 Cal. App. 4th 111, 125 n.7 (1999). 

The Elliott case, however, is not persuasive authority. Elliott involved an action on a

certificate of life insurance issued under a group policy, and neither of the Oroweat entities

was a defendant in the action. Thus, the court noted, “[T]he situation is therefore not one

where the plaintiff was seeking to pierce the corporate veil and impose liability upon one

company for the acts of the other.” Elliott, 272 Cal. App. 2d at 376. The court simply cited

the alter ego factors as support for its decision to reverse the judgment for the defendant

notwithstanding the verdict. 

More importantly, however, the court finds that plaintiffs have provided no evidence

of bad faith, or evidence that Dale and Nathan created the LLCs or the corporations as

separate entities in order to avoid the operation of a statute. Plaintiffs have not refuted

defendants’ evidence that there was a legitimate business reason for the formation of the

LLCs, and later, the corporations. In order to invoke the alter ego doctrine, plaintiffs must

demonstrate how the corporate structure was intended to deprive them of a right, or how it

has been used to do so. 

Finally, to the extent that plaintiffs have raised triable issues with regard to alter ego

liability, the court finds that such disputed facts are not material, as plaintiffs have argued

that an inquiry into alter ego liability would be superfluous.

5. Personal Jurisdiction

Defendants argue that the undisputed material facts show that the court does not

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 70 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

71

have personal jurisdiction over any defendant. Plaintiffs respond that the court has

repeatedly analyzed the issue of personal jurisdiction, and has ruled that sufficient

minimum contacts exist to establish both general and specific jurisdiction. They argue that

defendants’ motion does not identify any undisputed issues of material fact, or any case

law, that would warrant a different ruling on summary judgment.

California permits the exercise of personal jurisdiction to the full extent permitted by

due process. Cal. Civ. Code § 410.10. Absent one of the traditional bases for personal

jurisdiction (presence, domicile, or consent), due process requires that the defendant have

certain “minimum contacts” with the forum state, “such that the maintenance of the suit

does not offend traditional notions of fair play and substantial justice.” Int’l Shoe Co. v.

Washington, 326 U.S. 310, 316 (1945). The extent to which a federal court can exercise

personal jurisdiction will depend on the nature and quality of presence, or the nature and

quality of the defendant’s contacts with the forum state. 

If the defendant’s activities in the forum state are “substantial, continuous, and

systematic,” a federal court can (if permitted by the state’s “long arm” statute) exercise

jurisdiction as to any cause of action, even if unrelated to the defendant’s activities within

the state. Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 445 (1952). This is

referred to as “general jurisdiction.” If a non-resident’s contacts with the forum state are not

sufficiently continuous and systematic for general jurisdiction, that defendant may still be

subject to “specific jurisdiction” on claims related to its activities or contacts in the forum. 

See Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1169 (9th Cir. 2006). 

When a defendant moves to dismiss a complaint for lack of personal jurisdiction, the

plaintiff bears the burden of demonstrating that jurisdiction is proper. Rio Properties, Inc. v.

Rio Int’l Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002). Where the motion is based on

written materials rather than on an evidentiary hearing, the plaintiff need only make a prima

facie showing of jurisdictional facts. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d

797, 800 (9th Cir. 2004). In such cases, the court need only inquire into whether the

plaintiff’s pleadings and affidavits make a prima facie showing of personal jurisdiction. Id.

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 71 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

72

Although the plaintiff cannot rest on the bare allegations of the complaint, uncontroverted

allegations in the complaint must be taken as true. Id. Conflicts between the parties over

statements contained in affidavits must be resolved in the plaintiff’s favor. Id. 

Presenting a prima facie case of personal jurisdiction, however, does not necessarily

guarantee jurisdiction over the defendant at the time of trial. Lake v. Lake, 817 F.2d 1416,

1420 (9th Cir. 1987). If the pleadings or other declarations raise issues of credibility or

disputed questions of fact, the court may, in its discretion, order a preliminary hearing to

resolve the contested issues. In that situation, the plaintiff must establish the jurisdictional

facts by a preponderance of the evidence. Data Disc, Inc. v. Systems Tech. Assoc., Inc.,

557 F.2d 1280, 1285 (9th Cir. 1977). Alternatively, the plaintiff must prove the jurisdictional

facts at trial by a preponderance of the evidence. Id. at 1289 n.5.

The court previously found, in orders issued on May 3, 2004, on April 25, 2005, and

on March 13, 2006, that plaintiffs had established a prima facie case of personal

jurisdiction. Nevertheless, defendants now assert that the previous rulings are to no effect

because the court failed to find personal jurisdiction as to each defendant, individually. 

Defendants also contend that the previous rulings were made before the record in this case

was fully developed, and are not “evidence” and cannot be considered as such. 

Plaintiffs argue in response that the court has repeatedly analyzed the issue of

personal jurisdiction, and has ruled that sufficient minimum contacts exist to satisfy both

general and specific jurisdiction. They contend that the record is replete with evidence

supporting the court’s exercise of personal jurisdiction over defendants as well as the

propriety of applying California law to this case. They also assert that it is undisputed that

the court has jurisdiction over four of the defendants – Dale Gwilliam, Nathan Gwilliam,

Adoption.com (the partnership), and Adoption Profiles LLC. 

a. General Jurisdiction

For general jurisdiction to exist over defendants in this case, defendants must have 

engaged in “continuous and systematic general business contacts” in the forum. 

Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 416 (1984) (citing

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 72 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

73

Perkins, 342 U.S. 437). “This is an exacting standard, . . . because a finding of general

jurisdiction permits a defendant to be haled into court in the forum state to answer for any

of its activities anywhere in the world.” Schwarzenegger, 374 F.3d at 801. In considering

whether it has general jurisdiction over a defendant, the court should look at all the

defendant’s activities that impact the state, including whether the defendant makes sales,

solicits or engages in business in the state, serves the state’s markets, designates an agent

for service of process, holds a license, or is incorporated there. Bancroft & Masters, Inc. v.

Augusta Nat’l Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). 

Defendants argue that no defendant has sufficient contacts for general jurisdiction. 

They contend that the Adoption.com partnership and Dale and Nathan as general partners

currently have no substantial or continuous contacts with California, and have had no

contacts with California since the partnership distributed the Adoption.com and

ParentProfiles.com websites to Dale and Nathan in January 2003. 

Thus, defendants assert, to the extent that the general partners or the partnership

ever had any substantial or continuous contacts with California, those contacts ceased,

never to be renewed, nearly eleven months before the present lawsuit was filed. Based on

these facts, defendants contend that neither the general partners nor the partnership may

be subjected to general jurisdiction. Defendants contend that the corporate defendants

likewise have had no contacts with California, and cannot be subjected to general

jurisdiction.

Defendants argue that Adoption Profiles LLC and Adoption Media LLC are the only

defendants with current contacts with California. However, defendants assert, those

contacts cannot be deemed “continuous and systematic,” as neither LLC has directed or

currently directs solicitations toward California businesses or residents. Defendants claim

that the only advertising defendants do is directed at a nationwide audience, and assert

that advertisements over the Internet cannot be used to subject a business to general

jurisdiction. 

In opposition, plaintiffs argue that the court has found general jurisdiction on

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 73 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

74

numerous occasions, based on its analysis of the record evidence in the case. They quote

at length from the court’s previous order of May 3, 2004, denying the original defendants’

motion to dismiss, and the order of April 25, 2005, denying the original defendants’ motion

for reconsideration of the portion of the May 3, 2004, order finding that plaintiffs had

established a prima facie case of personal jurisdiction; and also cite to the declarations filed

by plaintiffs in support of their oppositions to those motions. 

They contend that the Internet-based activities of Adoption Profiles LLC are

sufficient to support general jurisdiction, given that those activities are targeted at California

residents and have resulted in contacts with California residents.

b. Specific Jurisdiction

Specific personal jurisdiction requires that the plaintiff make a three-part showing. 

The plaintiff must show 1) that the out-of-state defendant purposefully directed its activities

toward residents of the forum state or otherwise established contacts with the forum state;

2) that the plaintiff’s cause of action arises out of or from the defendant’s forum-related

contacts; and 3) that the forum’s exercise of personal jurisdiction in the particular case is

reasonable – that it comports with fair play and substantial justice. Burger King Corp. v.

Rudzewicz, 471 U.S. 462, 477-78 (1985). In addition, courts including the Ninth Circuit

have adopted a “flexible approach” that may allow personal jurisdiction with a lesser

showing of minimum contacts where dictated by considerations of reasonableness. See 

Ochoa v. J.B. Martin & Sons Farms, Inc., 287 F.3d 1182, 1188 n.2 (9th Cir. 2002). 

The first requirement is that the defendant must have purposefully directed its

activities at residents of the forum, or purposefully availed itself of the privilege of

conducting activities within the forum state, thus invoking the benefits and protections of

local law. Hanson v. Denckla, 357 U.S. 235, 253-54 (1958). In examining “purposeful

direction” – most often used in cases involving tort claims – courts apply the “effects test,”

which requires that the defendant have 1) committed an intentional act, 2) expressly aimed

at the forum state, 3) causing harm that the defendant knows is likely to be suffered in the

forum state. Schwarzenegger, 374 F.3d at 802-03; see also Panavision Int’l L.P. v.

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 74 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

75

Toeppen, 141 F.3d 1316, 1320-22 (9th Cir. 1998). 

Defendants contend that no defendant has sufficient contacts for specific jurisdiction. 

They assert that plaintiffs’ claims involve their October 2002 application to have their profile

posed on ParentProfiles.com, and the rejection of that application by Adoption.com and its

general partners. Defendants contend that apart from this lawsuit, plaintiffs have never had

any contact with the LLC defendants or with the corporate defendants. Thus, they argue,

there is no basis for a finding of specific jurisdiction over Adoption Media LLC, Adoption

Profiles LLC, True North, or Aracaju, or against Dale Gwilliam or Nathan Gwilliam as

officers, directors, or managers of those entities.

Defendants also argue there is no basis in the record for subjecting the

Adoption.com general partnership or its general partners to specific jurisdiction. They claim

that there is no evidence that the partnership committed an intentional act, aimed at

California, which caused plaintiffs harm, or that the general partners knew was likely to

cause harm. They assert that under Schwarzenegger, 374 F.3d at 804-05, general

foreseeability that an injury could occur in another state, standing alone, is insufficient for

the exercise of personal jurisdiction under the effects test. They contend that under Yahoo!

Inc. v. La Ligue Contre Le Racisme et L’Antisemitisme, 433 F.3d 1199, 1206 (2006), there

must be more than “mere untargeted negligence” to meet the effects test. They assert that

what plaintiffs are complaining about in this case is “mere untargeted acts,” which

defendants argue is not the kind of activity necessary to satisfy the “effects” test. 

Defendants concede that Dale and Nathan, as general partners of the Adoption.com

partnership, undertook numerous intentional acts that involved California, including

purchasing the Adopting.org website. But they maintain that no intentional act expressly

aimed at California is the source of plaintiffs’ injuries. They argue that the act that caused

the alleged Unruh Act violation was an act of “considered decision, dictated by their

consciences and best judgment as to the best interests of children,” to limit

ParentProfiles.com’s customers to prospective parents who were heterosexual married

couples. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 75 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

76

Defendants claim that their refusal to enter into a contract is not the type of activity

necessary to satisfy the “effects” test. They assert that while Dale and Nathan may have

undertaken numerous intentional acts that involved California, such as purchasing the

Adopting.org website, no intentional act expressly aimed at California is the source of

plaintiffs’ alleged injuries.

Defendants contend that apart from this lawsuit, plaintiffs have never had contact

with the LLC defendants or the corporate defendants. They also note that neither the LLC

defendants nor the corporate defendants existed in October 2002. Thus, they assert, there

is no basis for a finding of specific jurisdiction over Adoption Media LLC, Adoption Profiles

LLC, True North, Aracaju, or Dale and Nathan Gwilliam in their capacity as officers,

managers, or directors of those entities. 

Defendants also contend that plaintiffs have failed to show any “but-for” causation, to

establish specific jurisdiction. In other words, they argue that plaintiffs have failed to

provide evidence showing that but for defendants’ contacts with California, plaintiffs would

not have applied to ParentProfiles.com. Defendants claim that the alleged Unruh Act

injuries could not have arisen out of the relationship between the Adoption.com partnership

and IAC, because IAC’s recommendation that plaintiffs post their profile on

ParentProfiles.com was not based on a relationship with the Adoption.com partnership, and

because IAC did not actually recommend that plaintiffs post their profile on defendants’

website.

In opposition, plaintiffs argue that the court’s previous findings continue to support

specific jurisdiction, again quoting from the May 3, 2004, and April 25, 2005, orders, and

citing to the declarations filed by plaintiffs in opposition to defendants’ motions. They

contend that the evidence referenced therein, as well as the evidence previously submitted,

supports the fact that defendants do more business in California than in any other state,

including Arizona. 

Plaintiffs argue that the court has specific jurisdiction, because the original injury in

2002 arose out of plaintiffs’ contacts with the Adoption.com partnership, Dale Gwilliam, and

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 76 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

77

Nathan Gwilliam. They assert that defendants discriminated against people they knew to

be California residents, and that defendants knew that the brunt of the injury would be felt

by them in California. They contend that these injuries were not the result of plaintiffs’

unilateral overtures to the partnership and the Gwilliams, but rather were the result of

defendants’ successful and deliberate attempts to solicit business from California residents

through California adoption agencies.

Plaintiffs also contend that Adoption Profiles LLC is subject to specific jurisdiction

because its policy, from January 2003 to the present, has denied access to the Butlers and

other same-sex couples in California who would like to use the services of

ParentProfiles.com. They argue that Adoption Profiles LLC simply continued the

discriminatory policy initiated by the Gwilliams while the Adoption.com partnership owned

the ParentProfiles.com website. They claim that this intentional action was expressly

aimed at California. As well, they assert that Adoption Profiles LLC encourages adoption

agencies located in California to recommend that prospective adoptive parents apply to be

listed on ParentProfiles.com, and has entered into agreements with California businesses,

including IAC. 

Plaintiffs assert that Dale and Nathan Gwilliam, as the sole officers and managers of

Adoption Profiles LLC, created and exclusively control the policies of the LLC. They assert

that the Gwilliams’ active participation in denying access to the Butlers and other California

same-sex couples makes them individually subject to personal jurisdiction for claims arising

out of that denial.

c. Analysis

It is true, as defendants argue, that personal jurisdiction, if challenged, must be

established as to each defendant individually. See Rush v. Savchuk, 444 U.S. 320, 331-32

(1980). However, both the original defendants’ motion to dismiss for lack of personal

jurisdiction and their motion for reconsideration of the order denying the motion to dismiss

for lack of personal jurisdiction referred throughout to “defendants’ activities in California”

and “defendants’ contacts with California.” Thus, the orders issued by the court on May 3,

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 77 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

15 In their motion for leave to file the FAC, plaintiffs explained that at the time the

original complaint was filed, they were unaware that Adoption.com was both a website and a

general partnership, and had not yet learned of the existence of True North and Aracaju. 

78

2004, and April 25, 2005, were also directed to the California activities and contacts of

“defendants.”

Moreover, the May 3, 2004, and April 25, 2005, orders did address the contacts of

the individual defendants by implication. That is, where the orders discussed jurisdiction

over “defendants” in connection with the events that occurred in late 2002 (rejection of the

Butlers’ ParentProfiles.com application), the ruling applied to Dale Gwilliam and Nathan

Gwilliam, as the Gwilliams had not yet created the LLCs at that point. Where the orders

discussed jurisdiction over “defendants” in connection with the post-2002 activities, the

ruling applied to the LLCs.

The ruling as to the Gwilliams can also be extended to the Adoption.com

partnership.15 The Gwilliams, as general partners in the partnership, developed and

implemented the “married-couples-only” policy. In both California and Arizona, a partner is

an agent of the partnership when carrying on the business of the partnership in the usual

way. Cal. Corp. Code § 16301(1); Ariz. Rev. Stat. § 29-1021(1). For purposes of personal

jurisdiction, the actions of an agent are attributable to the principal. Sher v. Johnson, 911

F.2d 1357, 1362 (9th Cir. 1990) (interpreting former Cal. Corp. Code § 15009(1), repealed

effective Jan. 1, 1999, and replaced with Cal. Corp. Code § 16301). Thus, the actions that

warrant the exercise of specific jurisdiction over the Adoption.com general partnership, as

set forth in the earlier orders, were undertaken by the Gwilliams, as general partners. 

Defendants argue, of course, that there can be no personal jurisdiction over the

Gwilliams and the Adoption.com partnership with regard to the October 2002 denial of

plaintiffs’ application to post their profile on ParentProfiles.com, because the website was

transferred to Adoption Profiles LLC in January 2003. Thus, according to defendants,

because the Adoption.com partnership no longer owned ParentProfiles.com when the

complaint in this action was filed in January 2004, the court cannot exercise jurisdiction

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 78 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

79

over the partnership. The court declines to adopt this theory. The court is satisfied, based

on the evidence heretofore provided, that it has jurisdiction over the partnership and the

general partners based on their activities vis-à-vis California prior to January 2003. 

After plaintiffs amended the complaint, defendants again moved to dismiss for lack

of personal jurisdiction. The motion filed by the original defendants (the Gwilliams and the

LLCs) and the motion filed by the Adoption.com partnership and Dale and Nathan as

general partners made essentially the same arguments they had made in the previous

motions and the same arguments they are making here – that neither Dale and Nathan

Gwilliam, nor the LLC defendants had sufficient contacts with California for general

jurisdiction; that plaintiffs could not establish specific jurisdiction over the original

defendants because the lawsuit did not arise out of those defendants’ contacts with

California; that the LLC defendants could not be subject to specific jurisdiction because

they did not exist in October 2002; and that plaintiffs had not adequately pled alter ego

liability. The motion filed by True North and Aracaju argued both that the court did not have

personal jurisdiction over the corporate defendants because the corporate defendants had

no contacts with California, and that plaintiffs had not adequately pled alter ego liability. 

In its order filed March 13, 2006, the court denied the original defendants’ motion

and the motion of the general partners on the ground that it had previously found that

plaintiffs had stated a prima facie case of personal jurisdiction. The court denied the

motions of the partnership and the corporate defendants on the ground that plaintiffs had

established a prima facie case of alter ego liability. Thus, the only defendants as to which

the court has not specifically found a prima facie case of personal jurisdiction are the

corporate defendants. 

As the court has now found that summary judgment should be granted on plaintiffs’

alter ego and successor liability claims, the basis for finding personal jurisdiction over the

corporate defendants has evaporated. Based on plaintiffs’ failure to establish a prima facie

case of personal jurisdiction over True North and Aracaju, the court finds that those

defendants must be dismissed for lack of personal jurisdiction. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 79 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

80

 With regard to the remaining defendants, apart from the analysis provided above,

the court is not inclined to again revisit the same arguments previously made by the

defendants. Defendants describe their motion regarding personal jurisdiction as “not

technically a motion for [s]ummary [j]udgment.” Although they do not say what kind of

motion it is, the court is evidently meant to consider it as another Rule 12(b)(2) motion. 

In the June 21, 2005, order regarding the plaintiffs’ motion to strike the affirmative

defenses, the court denied the motion to strike the first through fourth affirmative defenses,

in which defendants alleged that the court does not have personal jurisdiction over,

respectively, Adoption Media LLC, Adoption Profiles LLC, Dale Gwilliam, and Nathan

Gwilliam. The denial was based on the rule stated in Data Disk, – that even when a plaintiff

succeeds in making a prima facie showing of jurisdictional facts, “he must still prove

jurisdictional facts at trial by a preponderance of the evidence.” Data Disk, 557 F.2d at

1286 n.2. 

Thus, the June 21, 2005, order directed defendants, no later than 60 days prior to

trial, to “submit a list of the alleged disputed facts or credibility considerations, which they

intend to present to the jury for determination on the factual aspects of” the dispute

regarding personal jurisdiction. That order did not contemplate a renewal of defendants’

previous Rule 12(b)(2) arguments. Accordingly, defendants motion as to personal

jurisdiction is DENIED, except as to True North and Aracaju.

6. Objections to Evidence and Motions to Strike Evidence

The parties have submitted objections to evidence and motions to strike evidence. 

The court has reviewed the objections, and finds that the evidence at issue appears to

have been submitted primarily in support of or in opposition to the motions for summary

judgment on liability under the Unruh Act, the motion for summary judgment on the claims

of alter ego and successor liability, or the motion to dismiss for lack of personal jurisdiction. 

Because the court has not granted any of those motions in reliance on the disputed

evidence, the objections are OVERRULED. Defendants have also objected to plaintiffs’

request for judicial notice, filed December 8, 2006. That objection is also OVERRULED. 

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 80 of 81
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

81

CONCLUSION

In accordance with the foregoing, plaintiffs’ motion for summary judgment is

DENIED; defendants’ motion for summary judgment is GRANTED as to the claims under

Business and Professions Code §§ 17200 and 17500; GRANTED as to the claims of alter

ego and successor liability; and DENIED as to the claims under the Unruh Act. 

Defendants’ motion to dismiss for lack of personal jurisdiction is GRANTED as to True

North and Aracaju, and DENIED as to the remaining defendants. 

The court will conduct a case management conference to discuss the trial schedule

on Thursday, April 26, 2007, at 2:30 p.m.

IT IS SO ORDERED.

Dated: March 30, 2007 ______________________________

PHYLLIS J. HAMILTON

United States District Judge

Case 4:04-cv-00135-PJH Document 337 Filed 03/30/07 Page 81 of 81