Free Reply - District Court of California - California

Case 3:08-cv-01166-IEG-POR

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Daniel T. Pascucci, Esq. (SBN 166780) [email protected] Nathan R. Hamler, Esq. (SBN 227765) [email protected] MINTZ LEVIN COHN FERRIS GLOVSKY AND POPEO PC 3580 Carmel Mountain Road, Suite 300 San Diego, California 92130 Telephone: (858) 314-1500 Facsimile: (858) 314-1501 Mark B. Mizrahi, Esq. (SBN 179384) [email protected] BELASCO JACOBS & TOWNSLEY, LLP 6100 Center Drive, Suite 630 Los Angeles, California 90045 Telephone: (310) 743-1188 Facsimile: (310)743-1189 Attorneys for Defendant INNOVATION VENTURES, LLC dba LIVING ESSENTIALS UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

HANSEN BEVERAGE COMPANY, a Delaware corporation, Plaintiff,

Case No. 08-cv-1166 IEG (POR) LIVING ESSENTIALS' REPLY TO ITS EX PARTE MOTION FOR DISCOVERY TO RESPOND TO MOTION FOR PRELIMINARY INJUNCTION Courtroom.: 1, Fourth Floor Judge: Lousia S. Porter Date Filed: 07/01/08

18 v. 19 20 21 22 23 24 25 26 27 28 INNOVATION VENTURES, LLC dba LIVING ESSENTIALS, a Michigan corporation, Defendant.

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I. REPLY BRIEF Hansen Beverage Company's ("Hansen") opposition to Living Essentials' Ex Parte Application for Discovery camouflages what is nothing more than an attempt to prejudice Living Essentials. Hansen seeks to shut down Living Essentials and its 5 HOUR ENERGY® product without allowing any discovery or testing of the evidence presented by Hansen. In fact, Hansen even objected to Living Essentials' use of Hansen's own Q2 earnings call transcript in opposing Hansen's Motion for Preliminary Injunction. (Dkt. #17.) Hansen Beverage claims this case is simple, but it is not. On page 2, Hansen Beverage boldly asserts: Then, paragraph 18 [of the Complaint] gets to the heart of its: "...the name '5 HOUR ENERGY®' is, in and of itself, false and misleading . . . " But, Hansen uses ellipses to cover the true basis for its allegation. Paragraph 18 of the Complaint states that the trademark 5 HOUR ENERGY® is: "untruthful based on the drink's ingredients and generally accepted principals of biochemistry, pharmacology, and physiology." Now, Hansen Beverage seeks to shut down 5 HOUR ENERGY® ­ a product that has been on the market for four years ­ without any inquiry as to these allegedly "generally accepted principals." To support these "principals," Hanson introduced an "expert" declaration from Dr. Thomas Davis. Now, to avoid discovery, it asserts: "Dr. Davis' deposition is unnecessary." (p. 8.) Hansen does not withdraw this "unnecessary" declaration but seeks to preclude Living Essentials from cross-examining Dr. Davis. As the basis for his opinion that 5 HOUR ENERGY® is false, Dr. Davis states in paragraph 12: . . . there is no type of human energy that does not require consumption and burning of calories. The only energy-yielding nutrients are proteins, carbohydrates, alcohol, and fats. This testimony, upon which Dr. Davis' testimony is based, is directly contradicted by Hansen's own advertising. Hansen advertises its "Diet Red Energy Drink" as providing energy "without all the calories." (8/27/08 Supp. Hamler Decl., Ex. A.) Hansen also states in its advertising that amino acids and B vitamins ­ the same ones as those in 5 HOUR ENERGY® ­ provide "an immediate energy boost." (Id.) Dr. Davis' "opinions" contrary to Hansen's own advertising need to be tested. 1 Case No. 08-cv-1166 IEG (POR)

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Hansen Beverage also submitted the declaration of its CEO, Rodney Sacks, claiming that Hansen needs immediate relief and will be "irreparably harmed" if Living Essentials is allowed to continue selling its 5 HOUR ENERGY® product ­ the same product that Living Essentials has sold for four years. Again, Hansen does not want Mr. Sacks cross-examined.1 Mr. Sacks testifies that: "I believe that Living Essentials' ads have adversely affected Hansen's sales." (¶ 35.) But, Hansen reported "record sales" in its 2nd Quarter financial results ­ contrary to the harm alleged. (8/27/08 Supp. Hamler Decl., Ex. B.) Again, Hansen does not want its evidence questioned and does not want Living Essentials to be able to properly prepare for a preliminary injunction hearing. Finally, buried at the end of Hansen's opposition brief2, Hansen consciously avoids identifying how long it has known about Living Essentials' 5 HOUR ENERGY® product. While Hansen admits that it knew of Living Essentials' 5 HOUR ENERGY® product in February 2008, Hansen doesn't state when it first learned of the 5 HOUR ENERGY® product and why it delayed in moving for a preliminary injunction. Certainly, discovery is needed to determine when Hansen knew of the 5 HOUR ENERGY® product. It is believed Hansen has known about the 5 HOUR ENERGY® product for years ­ the same product that they seek to exclude from the market.3 As this Court is well-aware, "delay [in seeking injunctive relief] rebuts any contention of irreparable injury." Whittier Colleges v. American Bar Ass'n, 2007 WL 1624100, *9 (C.D. Cal. 2007) (8/27/08 Supp. Hamler Decl., Ex. C); Playboy Enters., Inc. v. Netscape Commc'ns Corp., 55

Again, Hansen asserts that Rodney Sacks' testimony is "unnecessary to oppose Hansen's motion" but Hansen does not withdraw it. 2 Hansen also references Rule 26, but that is nothing more than a red herring. Discovery can be accomplished quickly and expeditiously. Hansen, however, seeks to prejudice Living Essentials by prohibiting any inquiry into the voracity of the statements made in support of its preliminary injunction motion. Hansen's claim that it cannot provide discovery before a Rule 26 conference is disingenuous. 3 The timing of Hansen's motion for preliminary injunction is suspect as it coincides with Hansen's release of a 3-ounce energy supplement to directly compete with 5 HOUR ENERGY®. (8/21/08 Hamler Decl., Ex. A, at p.4.) Hansen's anti-competitive actions do not end with this lawsuit. Hansen filed suit against Red line which states on their bottle "7 hour Energy Boost." 3:2008 CV 01545. Yet, Hansen has not sought a preliminary injunction in that case illustrating the lack of irreparable injury. 2 Case No. 08-cv-1166 IEG (POR)

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F.Supp.2d 1070, 1090 (C.D. Cal. 1999) (finding five month delay in seeking injunctive relief "demonstrates the lack of any irreparable harm").4 At this juncture, Living Essentials will be satisfied with the following discovery prior to the preliminary injunction hearing: 1. 2. 3. The deposition of Dr. Thomas Davis pursuant to Rule 30. The deposition of Randy Sacks pursuant to Rule 30. A Rule 30(b)(6) deposition of Hansen with a deponent prepared to testify

with Hansen's knowledge of: (a) Hansen's first knowledge of Living Essentials; (b) Hansen's first knowledge of the 5 HOUR ENERGY® product; (c) Hansen's sales of its various energy drinks by month in 2007 and 2008; (d) Hansen's advertising regarding its Hansen's Diet Red Energy drink, Monster Lo-Carb energy drink, Energy Waters energy drinks and the effects thereof; (e) any internal analysis (scientific or marketing) regarding Hansen's energy drinks or Living Essentials' 5 HOUR ENERGY® product; and (f) Hansen's decision to enter the 2-3 ounce "energy shot" market and all reasons and considerations thereto. 4. Pursuant to Rule 34, the production of all documents regarding Living

Essentials or the 5 HOUR ENERGY® product. 5. Pursuant to Rule 34, the production of all documents regarding Hansen's

entry into the 2-3 ounce energy market, including, but not limited to, all marketing plans, forecasts or studies related to such products. 6. Pursuant to Rule 34, all documents regarding any internal scientific or

marketing analysis concerning or discussing Hansen's energy drinks or Living Essentials 5 HOUR ENERGY® product. /// ///

4

Hansen makes unfounded assertions regarding the operation of Living Essentials' web sites and its action in the Eastern District of Michigan. Hansen fails to advise the Court that Living Essentials brought the Michigan action within weeks of the offending product's introduction. It is also worth note that Living Essentials' website was only recently temporarily unavailable due to a change in servers. 3 Case No. 08-cv-1166 IEG (POR)

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Lastly, Hansen mentioned the need for a Protective Order. Living Essentials is prepared to promptly negotiate a Protective Order, but in the interim, Living Essentials will accept all discovery on an "attorneys' eyes only" basis to facilitate prompt disclosure. II. CONCLUSION Living Essentials respectfully requests that the Court enter an order allowing it to take limited, expedited discovery concerning matters raised by Hansen's preliminary injunction motion and any defenses thereto. Dated: August 27, 2008 MINTZ LEVIN COHN FERRIS GLOVSKY AND POPEO PC By s/Nathan Hamler Nathan R. Hamler, Esq. Attorneys for Defendant INNOVATION VENTURES, LLC dba LIVING ESSENTIALS Mark A. Cantor (MI Bar No. P32661) Pro Hac Vice Application Anticipated Marc Lorelli (MI Bar No. P63156) Pro Hac Vice Application Anticipated Thomas W. Cunningham (MI Bar No. P57899) Pro Hac Vice Application Anticipated BROOKS KUSHMAN P.C. 1000 Town Center, Twenty-Second Floor Southfield, MI 48075-1238 Telephone: (248) 358-4400 Facsimile: (248) 358-3351

4

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4414929v.1

CERTIFICATE OF SERVICE I, the undersigned, certify and declare that I am over the age of 18 years, employed in the County of San Diego, State of California, and am not a party to the above-entitled action. On August 27, 2008, I filed a copy of the following document(s): LIVING ESSENTIALS' REPLY TO ITS EX PARTE MOTION FOR DISCOVERY TO RESPOND TO MOTION FOR PRELIMINARY INJUNCTION by electronically filing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following: Norman L. Smith, Esq. Edward J. McIntyre, Esq. Alison L. Pivonka, Esq. SOLOMON WARD SEIDENWURM & SMITH 401 B Street, Suite 1200 San Diego, CA 92101 (619) 231-0303 Attorneys for Plaintiff HANSEN BEVERAGE COMPANY [email protected] [email protected] [email protected]

Executed on August 27, 2008, at San Diego, California. I hereby certify that I am employed in the office of a member of the Bar of this Court at whose direction the service was made.

s/Nathan Hamler Nathan R. Hamler, Esq.

1

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Daniel T. Pascucci, Esq. (SBN 166780) [email protected] Nathan R. Hamler, Esq. (SBN 227765) [email protected] MINTZ LEVIN COHN FERRIS GLOVSKY AND POPEO PC 3580 Carmel Mountain Road, Suite 300 San Diego, California 92130 Telephone: (858) 314-1500 Facsimile: (858) 314-1501 Mark B. Mizrahi, Esq. (SBN 179384) [email protected] BELASCO JACOBS & TOWNSLEY, LLP 6100 Center Drive, Suite 630 Los Angeles, California 90045 Telephone: (310) 743-1188 Facsimile: (310)743-1189 Attorneys for Defendant INNOVATION VENTURES, LLC dba LIVING ESSENTIALS UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

HANSEN BEVERAGE COMPANY, a Delaware corporation, Plaintiff,

Case No. 08-cv-1166 IEG (POR) SUPPLEMENTAL DECLARATION OF NATHAN R. HAMLER IN SUPPORT OF LIVING ESSENTIALS' REPLY TO ITS EX PARTE MOTION FOR DISCOVERY TO RESPOND TO MOTION FOR PRELIMINARY INJUNCTION Courtroom.: 1, Fourth Floor Judge: Lousia S. Porter Date Filed: 07/01/08

18 v. 19 20 21 22 23 24 25 26 27 28 INNOVATION VENTURES, LLC dba LIVING ESSENTIALS, a Michigan corporation, Defendant.

I, NATHAN R. HAMLER, DECLARE AS FOLLOWS: 1. I am an attorney at law duly licensed to practice law in the State of California, and

am an associate with the law firm of Mintz Levin Cohn Ferris Glovsky and Popeo, P.C, counsel for Defendant Innovation Ventures, LLC dba Living Essentials. I have personal knowledge of the facts set forth in this declaration and could and would competently testify as to the same. 1 Case No. 08-cv-1166 IEG (POR)

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2.

Attached as Exhibit B to this declaration is a true and correct copy of a document

downloaded from plaintiff Hansen Beverage Company's public web site in this action, at the url address, http://www.hansens.com/products/products.php?subcat=15&color=energy. 3. Attached as Exhibit C to this declaration is a true and correct copy of a press release

downloaded from plaintiff Hansen Beverage Company's public web site, entitled "Hansen Natural Reports Record 2008 Second Quarter and Six Months Financial Results." 4. Attached as Exhibit D to this declaration is a true and correct copy of the United

States District Court for the Central District of California's decision in Whittier College v. American Bar Ass'n, No. CV 07-1817 PA, 2007 WL 1624100 (May 7, 2007). I declare under penalty of perjury under the laws of the state of California that the foregoing is true and correct and that this declaration is executed this 27th day of August, 2008 at San Diego, California. s/Nathan Hamler Nathan R. Hamler

2

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4414931v.1

CERTIFICATE OF SERVICE I, the undersigned, certify and declare that I am over the age of 18 years, employed in the County of San Diego, State of California, and am not a party to the above-entitled action. On August 27, 2008, I filed a copy of the following document(s): SUPPLEMENTAL DECLARATION OF NATHAN R. HAMLER IN SUPPORT OF LIVING ESSENTIALS' REPLY TO ITS EX PARTE MOTION FOR DISCOVERY TO RESPOND TO MOTION FOR PRELIMINARY INJUNCTION by electronically filing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following: Norman L. Smith, Esq. Edward J. McIntyre, Esq. Alison L. Pivonka, Esq. SOLOMON WARD SEIDENWURM & SMITH 401 B Street, Suite 1200 San Diego, CA 92101 (619) 231-0303 Attorneys for Plaintiff HANSEN BEVERAGE COMPANY [email protected] [email protected] [email protected]

Executed on August 27, 2008, at San Diego, California. I hereby certify that I am employed in the office of a member of the Bar of this Court at whose direction the service was made.

s/Nathan Hamler Nathan R. Hamler, Esq.

1

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EXHIBIT A

Hansen's Official WebSite

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Energy ;Formula
It IS no wonder they call it the "HumanRace/' It seems we are running everywhere these davs, Unfortunately, given this frantic pace, we sometimes run out of steam. Hansen's Energy was conceived and specially most. formulated to provide a boost whenever you need it the

Hansen's Natural Soda,..
ffui~never had
it so ~od.

Original

Formula the most!

II

Hansen's energy provides an immediate energy boost whenever you need it Lightly carbonated citrus flavor,

Diet Red Energy EveFyoneneeds a 'jumpstart' from time to time. Nowyou can get yOUFS without all the calories!! Hansen's Diet Energy Supplement is specially formulated with the amino acid Taurine panax Ginseng L-Carnitine key B Vitamlns Glucose and other specially selected ingredients to provide an immediate energy boost* Hansen's Diet Energy is lightly carbonated with a great tasting berry flavor, i ~These statements have not been evaluated by the Food and Drug Administration, This product is not intended to diagnose treat cure or prevent any disease.

Home Products J About Hansen's] News& Events I Store I Investol" Relations I Contact i Team ] Hansen's] Ternls and Conditions/Privacy Policy Cc~pydght ©2,:>o8 Hansen a.,.w>.~age C{;mp~, All R~)lt~ ~e~,~ ~?, ve~;

http:Hwww.hansens.com/products/products.php?subcat= 15&color=energy

8/15/2008

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EXHIBIT B

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HansenNatural Reports Record 2008 SecondQuarter and Six MonthsFinancial Results Second QuarterNet SalesRise15,3 Percent $282,2Million; Net Income to Increases 31.1 Percent $50.2 to Million
CORONA, Calif., Aug 7, 2008 (PrimeNewswire via COMTEX Network) -- Hansen News Natural Corporation (Nasdaq:HANS) today reported record sales and profits for the second quarter and six-monthsendedJune30, 2008. Grosssales for the 2008second quarter increased 15.5 percent to $324.1million, from $280.6million a year earlier. Net sales for the second quarter increased15.3 percentto $282.2million from $244.8million a year ago. Grossprofit, as a percentage net sales, for the 2008second of quarter was51.8 percent compared 52.4 percent in the with comparable quarter andincreasedfrom 49.4 percent in the first quarter of 2008.Thedifferences in gross profit as a 2007 percentage net sales is primarily due to changes productmix. of in Operatingexpenses the 2008second for quarter increasedto $68.0million from $66.8million in the same quarter last year. Distribution costs as a percentage net sales were5.5 percentfor the quarter, compared 5.4 percentin the same of with quarter last year. Selling expenses a percentage net sales for the 2008second as of quarter were12.1 percent, compared with 10.6 percent a year ago. Increasesin sponsorship expenditures,sampling activities andcommissions, well as costs relating to event and as athlete sponsorships the UnitedKingdom, in contributed to the increasein suchexpenses over the prior year. Generaland administrative expenses the 2008second for quarter were$18.3million compared $27.6 million for the with comparable quarter last year. Includedin suchexpenses costs associated are with terminating existing distributors and legal and accounting fees relating to the special investigation of stock option grants, and grantingpracticesandrelated litigation (see Certain Identified Items below). Stockbased compensation non-cash (a item) was$3.7 million in the second quarter 2008,compared $2.0 million in the prior-year period. with Operatingincome the 2008second for quarter increased27.3 percent to $78.2 million from $61.4million a year ago. Net income the second for quarter of 2008increased31.1 percent to $50.2million, or $0.51per diluted share, compared with $38.3million, or $0.39per diluted sharelast year. Net sales for the Company's segment DSD were $258.6million for the three-monthsendedJune 30, 2008, an increase of approximately $38.1million, or 17.3 percenthigher than net sales of $220.4million for the three-months ended June30, 2007. Net sales for the Company's warehouse segment were $23.7 million for the three-monthsendedJune 30, 2008, a decreaseof approximately $0.7 million, or 2.7 percentlower than net sales of $24.3million for the three-months ended June30, 2007. Within the DSD segment, sales of Monster(r) and JavaMonster(tin) drinks increased22.3 percent during the 2008second quarter while sales of Lost(r) Energy(tin), and other energydrinks werelower. Salesto customers outside the United States were$19.5million in the 2008second quarter (including sales of approximately $1.9 million in the UnitedKingdom), compared $13.4million in the comparable with quarter last year. In the six-months ended June30, 2008gross sales increased20.7 percent to $568.1million from $470.7million for the comparable period a year earlier. Net sales increased20.4 percent to $494.4million from$410.6million for the comparable period a year earlier. Gross profit as a percentage net sales was50.8 percentfor the first half of 2008compared 52.1 of to percent for the same period in 2007. Operatingexpenses the six-monthsended for June 30, 2008,increasedto $129.9million from $120.6million in the same period last year (see Certain Identified Items below). Operatingincome increased2g.7 percent to $t21.0 million from $93.3 million in the first six months 2007. of Net income the first half of 2008 for increased 35.1 percentto $79.0million, or $0.80per diluted share, compared $58.5 with

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million, or $0.59per diluted share,for the same periodlast year. Rodney Sacks,chairman chief executiveofficer, said that the record revenues profits reflect continuedstrong sales C. and and of Monster Energy(r) and Java Monster(tm) drinks which continuedto grow in excessof the categoryand gain marketshare. "Weare proud of the continuedstrong performance the Monster(r) brandat a time when of almost all categoriesof ready-todrink beverages the United States are experiencing weakness. in This weakness most pronounced convenience is in store cold drink channels,wherethe vast majority of energydrinks are sold. Wecontinueto believe that the moderating growththat we haveseenin energydrinks appears,in part, to be due to the challenging macroeconomic environment the resulting and decline in store traffic primarily in the convenience gassector especially in Southern and California," added Sacks. In the first six months 2008 Company of the experienced increasedcosts of certain raw materials principally applejuice concentrate, aluminum cans and sugar which had a greater impact on the warehouse segment than on the DSD segment. During the three-monthsendedJune 30, 2008the Company purchased1.7 million shares of common stock at an average purchase price of $29.46per share which the Company holds in treasury. CertainIdentified Items Contributionsnet of reimbursements totaling ($0.4) million and$6.5 million for the three-months ($0.4) million and $19.8 and million for the six-months, endedJune 30, 2008and 2007, respectively, wererecordedby the Company related to AnheuserBusch distributors for their contributions to offset the costs of terminatingprior distributors. Such amounts been have accounted as deferred revenue,and are being recognizedas revenue for ratably over the anticipated 20-yearlife of the respective Anheuser-Busch distribution agreements. Revenue recognizedwas$0.5 million for the three-months and $1.0 million for the six-months endedJune30, 2008and2007, respectively. In connection with the transition of certain of the Company's distribution arrangements, Company the incurred termination costs amounting $0.1 million and $8.4 million in the three-months $0.1 million and $14.7million in the six-months,ended to and June 30, 2008 2007,respectively, to certain of its prior distributors, whohavebeen and replacedby Anheuser-Busch distributors. Suchtermination costs have beenexpensed full and are included in operating expenses the corresponding in for periods. In connection with the Company's special investigation of stock option grantsand granting practices, related litigation and other related matters, the Company incurred professionalservice fees, net of insurance proceeds, ($0.4) million and$4.2 million of for the three-months ($0.2) million and $10.9million for the six-months and ended June30, 2008,and 2007respectively, which havebeenfully expensed the respective periods. in Thefollowing table summarizes identified items discussedabove the three and six-monthsendedJune30, 2008and the for 2007:

Three-Months Ended June 30, 2007 2008 (In Deferred Revenue: Thousands) Contributions from, net (In Thousands)

Six-Months Ended June 30, 2008 2007 (In Thousands) (In Thousands)

........................................

of reimbursements to,
Anheuser-Busch Distributors Recognition revenue of deferred $ 493 $ 509 $ 1,016 $ 936 $ (412) $ 6,497 $ (365) $ 19,847

Operating Expenses: Termination payments

to 150 $ 8,353 $ 150 $ 14,700

prior distributors $ Professional servicefees (net of insurance proceeds)associated with the review of stock

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option grants and granting practices, related litigation and other related matters

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$

(430)

$

4,221

$

(200)

$ 10,905

Auction RateSecurities At June30, 2008the Company auction rate securities with a face value of $129.8million ($207.5million at March31, held 2008). Additional redemptions amounting $8.9 million were received by the Company to during July. TheCompany determined that a temporary impairment $5.8 million had occurredat June30, 2008andrecordeda chargeof $3.4 million net of taxes of as a component accumulated of other comprehensive for the six-monthsendedJune 30, 2008. Thesesecurities will loss continueto accrueinterest at their contractual rates until their respectiveauctionssucceed they are redeemed. or "Basedon our ability to accesscash and other short term investmentsand basedon our expectedoperating cashflows, wedo not anticipatethat the currentlack of liquidity of theseinvestments havea materialeffect on our liquidity or working will capital," Sacks said. TheCompany host an investor conference will call on August7, 2008at 2:00 p.m. Pacific Time(5:00 p.m. EasternTime). The conference call will be opento all interested investors througha live audio web broadcastvia the internet at www.hansens.com and www.ooencomoany.info.those who not able to listen to the live broadcast,the call will be archivedfor For are approximatelyone year on both websites. Hansen Natural Corporation Based Corona,California, Hansen in Natural Corporationmarketsand distributes Hansen's(r)Natural Sodas,sparkling beverages, fruit juice Smoothies, Energy drinks, Energade(r) energysports drinks, multi-vitamin juice drinks in aseptic packaging, iced teas, apple juice and juice blends, Junior Juice(r) juices, Blue Sky(r) brandbeverages, Monster Energy(r) brand energydrinks, Java Monster(tm)brand non-carbonated dairy basedcoffee drinks, Lost(r) Energy(tm)brand drinks, Joker MadEnergy(tm), Unbound(r)Energy and Ace(tm) Energy brand energy drinks, Rumba(tm), Samba and brand energy juices. For moreinformation visit www.hansens.com www.monsterenerav.com. and Grosssales, although used internally by management an indicator of operating performance, as should not be consideredas an alternative to net sales, whichis determined accordance in with accounting principles generally accepted the United in States of America ("GAAP"),and shouldnot be usedalone as an indicator of operating performance place of net sales. in Additionally, gross sales maynot be comparable similarly titled measures to usedby other companies gross sales has been as defined by our internal reporting requirements.However, gross sales is used by management monitor operating to performance including sales performance particular products, salesperson of performance, product growthor declines and our overall performance. use of gross sales allows evaluation of sales performance The before the effect of anypromotionalitems, which can maskcertain performance issues. Management believes the presentation of gross sales allows a more comprehensive presentation of our operating performance. Grosssales maynot be realized in the form of cashreceipts as promotional payments and allowancesmaybe deductedfrom payments received from customers. Certain statementsmade this announcement constitute "forward-looking statements"within the meaning Section 27A in may of of the Securities Act of 1933, as amended, Section 21Eof the Securities Exchange of 1934,as amended, and Act regarding the expectationsof management respect to revenues profitability. Management with and cautions that these statementsare qualified by their termsor importantfactors, many whichare outside of the control of the Company, could causeactual of that results andeventsto differ materially fromthe statements made herein, including, but not limited to, the following: changes in consumer preferences;changes demand are weatherrelated, particularly in areasoutside of California; competitive in that pricing and/or marketing pressures;activities andstrategies of competitors;changes the price and/oravailability of raw in materialsfor the Company's products;the availability of production and/orsuitable facilities; the marketing efforts of the distributors of the Company's products,mostof whichdistribute productsthat are competitivewith the productsof the Company; introduction of newproducts, as well as unilateral decisions that maybe made grocery and/or convenience the by chain stores, specialty chain stores, club stores and other customers discontinuecarrying all or anyof the Company's to products that they are carrying at anytime; and other risks detailed fromtime to time in the Company's reports filed with the Securities and Exchange Commission. Company's The actual results could differ materially from those containedin the forward-looking statements. TheCompany assumes obligation to update any forward-looking statements. no

HANSEN NATURAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER INFORMATION FOR THE THREE- AND SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

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.....................................................................

Three-Months Ended June 30, 2008 Gross sales, net of discounts & returns* Less: Promotional allowances** and other 41,890 35,819 2007

Six-Months Ended June 30, 2008 2007

....................................

................................

$324,134

$280,582

$568,132

$470,651

73,710

60,036

................................

Net sales Cost of sales

282,244 136,031

244,763 116,510

494,422 243,489

410,615 196,726

................................

Gross profit Gross profit margin as a percentage of net sales

146,213 51.8%

128,253 52.4%

250,933 50.8%

213,889 52.1%

Operating expenses (i) Operating expenses as a percentage of net sales

68,023 24.1%

66,830 27.3%

129,916 26.3%

120,557 29.4%

................................

Operating income Operating income as a percentage of net sales Interest net and other income,

78,190 27.7%

61,423 25.1%

121,017 24.5%

93,332 22.7%

2,769

1,752

6,395

3,278

................................

Income before income taxes provision

provision

for 80,959 63,175 24,864 127,412 48,369 96,610 38,101

for income

taxes

30,727

................................

Net income Net income as a percentage net sales Net income Basic Diluted per common of

$ 50,232
========

$ 38,311
========

$ 79,043
========

$ 58,509
========

17.8%

15.7%

16.0%

14.2%

share: $0.54 $0.51 $0.43 $0.85 $0.65

$0.39

$0.80

$0.59

Case sales (in thousands) (in 192-ounce case equivalents) Average case net sales price per $

28,716

26,950

50,990

46,345

9.83

$

9.08

$

9.70

$

8.86

(i) Includes costs associated with terminating existing distributors and legal and accounting fees relating to the special investigation

Case 3:08-cv-01166-IEG-POR
of stock option grants and granting net of insurance proceeds.

Document 18-4
practices

Filed 08/27/2008
litigation,

Page 6 of 7

and related

* Gross sales, although used internally by management as an indicator of operating performance, should not be considered as an alternative to net sales, which is determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and should not be used alone as an indicator of operating performance in place of net sales. Additionally, gross sales may not be comparable to similarly titled measures used by other companies as gross sales has been defined by our internal reporting requirements. However, gross sales is used by management to monitor operating performance including sales performance of particular products, salesperson performance, product growth or declines and our overall performance. The use of gross sales allows evaluation of sales performance before the effect of any promotional items, which can mask certain performance issues. Management believes the presentation of gross sales allows a more comprehensive presentation of our operating performance. Gross sales may not be realized in the form of cash receipts as promotional payments and allowances may be deducted from payments received from customers. ** Although the expenditures described in this line item are determined in accordance with GAAP and meet GAAP requirements, the disclosure thereof does not conform with GAAP presentation requirements. Additionally, the presentation of promotional and other allowances may not be comparable to similar items presented by other companies. The presentation of promotional and other allowances facilitates an evaluation of the impact thereof on the determination of net sales and illustrates the spending levels incurred to secure such sales. Promotional and other allowances constitute a material portion of our marketing activities.

HANSEN NATURAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2008 AND DECEMBER 31, 2007 (In Thousands, Except Share Amounts) (Unaudited)
..................................................................

June 30, Dec. 31, 2008 2007 ASSETS CURRENT ASSETS: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current Deferred income taxes Total current assets

assets

$182,953 22,066 83,404 123,218 10,614 11,902 434,157 115,181 9,238 16,399 24,723 774

$ 12,440 63,125 81,497 98,140 3,755 11,192 270,149 227,085 8,567 14,006 24,066 730

INVESTMENTS PROPERTY AND EQUIPMENT, DEFERRED INCOME TAXES INTANGIBLES, net OTHER ASSETS

net

Case 3:08-cv-01166-IEG-POR

Document 18-4
$600,472
========

Filed 08/27/2008
$544,603
========

Page 7 of 7

LIABILITIES CURRENT Accounts Accrued Accrued Accrued Current Income Total

AND STOCKHOLDERS'

EQUITY

....................................

LIABILITIES: payable liabilities distributor terminations compensation portion of capital leases payable liabilities

$ 71,272 11,791 4,052 4,536 313 13,298 105,262 38,174

$ 56,766 9,019 4,312 5,827 663 6,294 82,881 39,555

taxes

current

DEFERRED

REVENUE AND CONTINGENCIES

COMMITMENTS

STOCKHOLDERS' EQUITY: Common stock - $0.005 par value; 120,000,000 authorized; 96,533,211 shares issued and 92,179,460 outstanding as of June 30, 2008; 95,848,711 shares issued and 93,191,191 outstanding as of December 31, 2007 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Common stock in treasury, at cost; 4,353,751 2,657,520 shares as of June 30, 2008 and December 31, 2007, respectively Total stockholders' equity

shares

483 105,919 432,691 (3,429) and (78,628) 457,036 $600,472
========

479 96,749 353,648 (47)

(28,662) 422,167 $544,603
========

This news releasewas distributed PrimeNewswire, by WWW.Drimenewswire.com SOURCE: Hansen NaturalCorporation
Hansen Natural Corporation Rodney C. Sacks, Chairman and Chief Executive (951) 739-6200 Hilton H. Schlosberg, Vice Chairman (951) 739-6200 PondelWilkinson Inc. Roger S. Pondel Judy Lin Sfetcu (310) 279-5980 (C) Copyright 2008 PrimeNewswire, Inc. All rights reserved. Officer

News Providedby COMTE×

Case 3:08-cv-01166-IEG-POR

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EXHIBIT C

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Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2007 WL 1624100(C.D.Cal.)

Page I

CWhittier College v. American Bar Ass'n C.D.Cal.,2007. Onlythe Westlaw citation is currently available. UnitedStates District Court,C.D.California. WHITTIER COLLEGE
V.

Paul R. Kiesel, William L. Larson, Kiesel Boucher & Larson, Beverly Hills, CA,for Whittier College. Anne E. Rea, Daniel M. Twetten, David T. Pritkin, Michael P. Doss, Robert Mark Stone, Sidley Austin, Los Angeles, CA, for AmericanBar Ass'n. CIVIL MINUTES-GENERAL ANDERSON, J.

AMERICAN BAR ASS'N No. CV07-1817 PA. May7, 2007. C. Kevin Reddick Deputy Clerk AttorneysPresent for Plaintiffs: Paul Kiesel William Larson Bridget Montero Court Reporter

N/A Tape No. Attorneys Present for Defendants: Patricia Larson Robert Stone Anne Rea

Proceedings:

Application for Preliminary Injunction Department of Education as the accrediting agency for law schools. An accredited law school qualifies for federal student loans and manystates require graduation from an ABA-accredited law school to become a member of the bar. The Council's accreditation process, whichthe ABA calls "approval," is governed by the ABA's Rules of Procedure.In makingits decisions, the Council is assisted by the Accreditation Committee(the "Committee"). The Committee and Council apply the ABA's published Standards for Approvalof LawSchools (the "Standards") and Interpretations (the "Interpretations") which help clarify the Standards. The Committee and Council monitor schools to ensure that they operate in compliance with the Standards. Among other methods, the ABAmonitors schools throughsite visits. Following inspection, the ,ite team an issues a report which is provided to the Commattee and the school. The Committee considers the site visit report and any commentsand evidence submitted by the school before makingfindings of fact and conclusions regarding the school's compliancewith the Standards. These written findings of fact and conclusions are provided to the

*1 Before the Court is a Motion for Preliminary Injunction filed by plaintiffs Whittier College and Whittier LawSchool (collectively "Whittier") (Docket No. 5). Whittier seeks injunctive relief against defendants the American Bar Association ("ABA") and the ABA's Council of the Section of Legal Education and Admissions to the Bar (the "Council") preventing the ABAfrom revoking Whittier's status as an ABAapproved law school. Whittier also seeks mandatory injunctive relief requiring the ABA revoke the ABA's to August 2005 decision placing Whittier on probation and to delete all references to Whittier's probationary status from all ABA websites and publications. Finally, Whittier requests that the Court enjoin the ABA from placing Whittier on probation for a period of five years and to forbid the ABA from proceeding against Whittier except in compliance with the ABA'spublished standards, interpretations, and rules of procedure. I. Factual Background The Council is recognized by the United States

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school. Representatives from the school may appear before the Committeeand be represented by counsel. A school's appearancebefore the Committee transcribed. is If the Committee concludes that it has reason to believe that a school is not in compliance with the Standards, the Committee will notify the school in writing of its concern and request additional information from the school. If, after reviewing additional information, the Committee determines that the school has not demonstrated compliance, the Committeemayorder the school to show cause whyit should not be required to take appropriate remedial action or be sanctioned. Sanctions mayinclude monetarypenalties, censure, probation, and removalfrom the list of ABA-approvedschools. Whenthe Council considers a recommendation from the Committee to impose sanctions, the Council will consider the Committee's findings of fact and conclusions, the record before the Committee, and may permit the school to submit additional evidence. The school mayappear before the Council and be represented by counsel. The school's appearancebefore the Council is transcribed. The Council then issues a written decision which is provided to the school. *2 Whenit decides that probation is warranted, the Council sets a time limit for the school to come into compliance. This time period may not exceed two years unless the Committee Council extends the probationary or period for good cause. If the Committeedecides at the end of a school's period of probation that the school has not established that it is in compliance, and there is no cause to extend probation, the Committee may recommend that the Council remove the school from the list of ABA-approved schools. If the Council agrees to removethe school from the approvedlist, the school may appeal the decision to the ABA's Houseof Delegates.FN1A school's removalfrom the approvedlist is stayed pending a decision by the House of Delegates. Any student who enrolls in an ABA-approved school prior to the decision to remove the school from the approved list becoming final is considered to have graduated from an ABAapprovedschool. FNI. The control and administration of the ABA is vested in the Houseof Delegates, the policymakingbodyof the association. Whittier became an ABA-approvedlaw school in 1985. The school moved from Los Angeles to Costa Mesa in 1997. Soon after moving to Costa Mesa, the first time

success rate of Whittier's graduates on the California bar examination plummeted. In 1999, the Committee and Council communicatedtheir concerns about Whittier's first-time passage rate on the California bar examination to Whittier.FN2In many of these communications, the Committee expressed its concern that Whittier's "graduates are less successful on the California bar examination than graduates of other ABA-approved law schools in California."See CoganDeclaration, Exhibits 4, 9, 10 & 11. As a result of the unfavorable comparison betweenWhittier's bar passage rate and the pas ,age rate of the other ABA-approved schools in California, the law Committeeconcluded that Whittier had not established compliance with Standard 301(a), which states: "A law school shall maintain an educational program that prepares its students for admission to the bar, and effective and responsible participation in the legal profession."The Committeealso found that Whittier had not established compliance with Interpretation 301-1, which provided: "Among factors to be considered in the assessing the extent to which a law school complies with [Standard 301] are the attrition rate of the school's students, and the bar passage and career placement rates ''FN3 graduates. of its FN2. The Committee had previously cited Whittier for its lowbar first-time passagerate in 1992, 1993, 1994 and 1995. See Cogan Declaration, Ex. 14, p. 212-13. FN3. Interpretation 301-1 was amended and renumberedin 2004. The revised Interpretation 301-3 states: "Among the factors to be considered in assessing the extent to wh ch a law school complies with this Standard are the rigor of its academic program, including its assessment of student performance, and the bar passage rates of its graduates."Unless otherwise noted, the Court will refer to Interpretation 3013. In responding to the Committee's concerns, Whittier frequently compared first-time bar passage rate to the its overall bar passage rate of students from California's ABA-approved law schools. See Cogan Declaration, Exhibits 7, 8, 18, 22, 23 & 24. Indeed, as both the ABA and Whittier acknowledge, both in their submissions to the Court and in more than six years of correspondence, with only one exception, Whittier's first-time bar passage rate has been persistently and substantially below the average for all California ABA-approved law schools

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since at least Examination February 1997 July 1997 February 1998 July 1998 February 1999 July 1999 February 2000 July 2000 February 2001 July 2001 February 2002 July 2002 February 2003 July 2003 February 2004 July 2004 February 2005 July 2005 February 2006 July 2006

the February 1997 California All California ABAapproved 69.8 82.4 62.8 72.1 55.8 69 50 74 50 79 52 72 57 72 49 69 58 70 60 74

bar Whittier 60.9 67.9 73.9 45.9 55.6 43 26 54 28 50 38 42 25 31 24 41 33 40 38 59

examination: Difference -8.9 -14.5 11.1 -26.2 -0.2 -26 -24 -20 -22 -29 - 14 -30 -32 -41 -25 -28 -25 -30 -22 - 15 noncompliance substantial and has been persistent."Id. is at p. 220.The Committee recommended that the Council place Whittier on probation for two years and require that Whittier demonstrate compliance with Standard 301 and Interpretation 301-3 before being removed from probation. Id. Whittier appealed the Committee's recommendation the Council. to In August 2005, the Council considered the Committee's recommendation along with the arguments and evidence submitted in support of Whittier's appeal. Representatives from Whittier, including the Dean, President, Chairman of the Boardof Trustees, and outside counsel appearedat the Council's meeting. In adopting the Committee's April 2005 findings of fact, the Council found that the Committee's findings were supported by s~'bstantial evidence. Id., Ex. 15, p. 240. The Council conchdedthat Whittier "has not demonstrated that it is in compliance with Standard 301(a) and Interpretation 301-3 and that the LawSchool's noncomplianceis substantial and has been persistent."Id, at p. 250.The Council placed Whittier on

*3 In light of its poor performance the bar examination on in comparison to the other California ABA-approved law schools, and after determining that Whittier's initial efforts to improveits bar passage rate had not resulted in any noticeable improvement, the Committee, in June 2004, ordered Whittier to show cause whyit should not be required to take appropriate remedial action, be placed on probation, or be removed from the list of ABAapproved law schools. See Cogan Declaration, Ex. 12. The Committeeconducted a hearing on its order to show cause in April 2005. Accompanied counsel, Whittier by Law School's Dean and Whittier College's President appeared at the hearing. In its April 2005 Recommendation,the Committee noted that "beginning in 1996, a significant double-digit gap developedbetween the School's first-time passage rate and the passage rate for all other ABA-approved schools in California."Id., Ex. 14, p. 214. The Committeeconcluded that Whittier "has not demonstrated that it is in compliance with Standard 301(a) and Interpretation 301-3 and that the LawSchool's

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Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2007 WL 1624100(C.D.Cal.)

probation for two years. Id. at p. 251.TheCouncil further determinedthat in order to be taken off probation prior to or at the end of the two year period, Whittier must demonstrate compliance with Standard 301(a) and Interpretation 301-3. ld. The Council also required Whittier to submit a plan for bringing the school into compliancewith Standard 301(a) and Interpretation 301-3 by October 2005. Since being placed on probation in August2005, Whittier has submitted its remedial plan and adopted a "small school" model with reduced enrollment and higher admission standards. According to Whittier, its probationary status has madeit moredifficult to improve its bar passage results. Several of its faculty have left, students, including someof Whittier's most successful, have transferred to other schools, and the smaller class size has reduced the school's financial resources. Despite these challenges, Whittier's success rate on the July 2006 California bar examimprovedby 19 points from the prior year from 40% to 59%. Even the 59% pass rate was, however, 15%below the average for all California ABAapproved schools. *4 In light of the improvement,Whittier petitioned the Committee in December2006 to remove the school from probation. Although noting the progress made by Whittier, the Committee declined to remove Whittier from probation prior to the expiration of the two-year probationary period in January 2007. In rejecting Whittier's request, the Committee issued a written decision which concluded that Whittier "has not yet demonstrated that it is in compliance with Standard 301(a) and Interpretation 301-[3]."Id., Ex. 25, p. 798. Whittier appealed the Committee's denial of its request to the Council. In February 2007, the Council considered Whittier's appeal. Representatives from Whittier, including the Dean, President, and Chairman the Board of of Trustees appeared at the Council's meeting. Id. at Ex. 26. Followingits review of the Committee'sdecision and the evidence submittedin support of Whittier's appeal, the Council concurred in the Committee's conclusion that Whittier was still not in compliance with Standard 301 and Interpretation 301-3. Id. As a result, Whittier remains on probation at least through August2007. On March19, 2007, following the denial of its appeal, Whittier commencedthis action. In its Complaint, Whittier alleges that the ABA violated its rights to has due process under Federal and California common law. Specifically, Whittier contends that in assessing its

compliance with Standard 301(a) and Interpretation 3013, the ABA has applied "unapproved and unpublished" criteria. In supportof its allegations, Whittier asserts that Hulett Askew,the ABA's Consultant on Legal Education, has admitted that rather than relying on the flexible guidelines for bar passage contained in Standard 301 and Interpretation 301-3, the ABA actually applies a strict objective numerical requirement. In testimony before the United States Department of Education in December 2006, Mr. Askew stated: If [the] bar passage is over 70 percent for the ~ aduating students in the mainState in whichthe school is located, there typically is no problem with that law school. However, that law school is more than ten points below if the ABA State averagein that [State], for instance, if the State average for all ABA schools is 90 percent, and the law school is at 75 percent, we mayrequest additional information from the school as to why you are falling belowyour sister law schools in your State. So if it's above 70 percent and within ten points of the average, there's typically no problem. If it is between70 and 60, I'll discuss that in a minute. If it's below 60 percent for the main jurisdiction in which the students take the exam, we will always request additional information from the law school in terms of what additional information it can provide us, the Accreditation Committee, the first cut about bar passagein that State. at Patton Declaration, Ex. 4, p. 95-96. Whittier further contends that the ABA'sMarch 2007 publication of a proposed amendmentto the Standards, which would add Interpretation 301-6 provides additional evidence that the ABA enforced a "secret" bar passage req~,irement. has The proposedInterpretation 301-6 states: *5 In considering bar passage rates whendetermining a school's compliance with Standards 301(a) and 501(b), the first-time bar passagerates of a school's graduates for the most recent three years in the three jurisdictions in which the largest numberof the school's graduates take the bar examination are initially reviewed. If data demonstrate to the Accreditation Committee that the school's first-time bar passagerates frequently are seventy percent or below, the school shall be asked to provide additional information in order to demonstratecompliance with the Standards. Such additional information may include, withoutlimitation, first-time bar passagerates for a number of years in other jurisdictions in which a substantial number the school's graduates take the bar of examination, second-time taker bar passage rates of the

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school's graduates for a number years, and ultimate bar of passage rates of the school's graduates for a numberof years; and, for the previous three years, information on academic support, attrition rates, bar preparation programs,and the entering credentials of students. SupplementalCogan Declaration, Ex. 2, p. 7; see alsoid. at p. 5 ("The 'trigger of 70%or below is the benchmark that the Accreditation Committeehas most frequently used in recent years."). II. Legal Standard for Issuance of a Preliminary Injunction Whittier filed its Motionfor Preliminary Injunction one day after commencing action. To obtain a preliminary this injunction in the Ninth Circuit, a party must demonstrate: "(1) a combinationof probable success on the merits and the possibility of irreparable injury or (2) that serious questions are raised and the balance of hardships tips sharply in its favor."Los Angeles Memorial Coliseum Comm'n Nat'l Football League, 634 F.2d 1197, 1201 v. (9th Cir.1980); accordTextile Unlimited, Inc. v. A..BMH Co., Inc., 240 F.3d 781,786 (9th Cir.2001)." 'These two formulations represent two points on a sliding scale in whichthe required degree of irreparable harmincreases as the probability of success decreases."' MAISystems Corp. v. Peak Computer, Inc., 991 F.2d 511,516-17 (9th Cir.1993) (quoting Diamontiney v. Borg, 918 F.2d 793, 795 (9th Cir.1990)). " 'Wherea party can show a strong chance of success on the merits, he need only show a possibility of irreparable harm. Where,on the other hand, a party can showonly that serious questions are raised, he mustshowthat the balance of hardships tips sharply in his favor." ' ld. at 1517 (quoting Bernardv. Air Line Pilots Ass'n, lnt'l, 873 F.2d 213, 215 (9th Cir.1989)). Delay in requesting injunctive relief mayrebut an allegation of irreparable harm. SeeMiller v. Cal. Pac. Med. Ctr., 991 F.2d 536, 544 (9th Cir.1993) (" 'Plaintiffs long delay before seeking a preliminary injunction implies a lack of urgency and irreparable harm." ') (quoting Oakland Tribune, Inc. v. Chronicle Publ'g Co., 762 F.2d 1374, 1377(9th Cir. 1985)). *6 For purposes of injunctive relief, " 'serious questions' refers to questions which cannot be resolved one way or the other at the hearing on the injunction and as to which the court perceives a need to preserve the status quo lest one side prevent resolution of the questions or execution of any judgmentby altering the status quo."' .Gilder v. PGA Tour, Inc. 936 F.2d 417,422 (9th Cir.1991) (quoting

Republic of the Philippines v. Marcos, 862 F.°d 1355, 1362(9th Cir.1988); see alsoid.("Serious questi )ns need not promise a certainty of success, nor even present a probability of success, but must involve a 'fair chance of success on the merits." '). "Underany formulation of the test, the moving party must demonstrate a significant threat of irreparable injury." Arcamu~i Continental Air v. Lines, Inc., 819 F.2d 935, 937 (9th Cir.1987) (citing Oakland Tribune, Inc., 762 F.2d 1374 at 1376). Additionally, in cases " 'where the public interest is involved, the district court must also examinewhetherthe public interest favors the plaintiff." ' Harris v. Boardof Supervisors, 366 F.3d 754, 760 (9th Cir.2004) (quoting Fundfor Animals, Inc. v. Luian, 962 F.2d 1391, 1400 (9th Cir.1992)). "The public interest inquiry primarily addresses impact on non-parties rather than parties." Sammartano First Judicial District Court, 303 F.3d v. 959, 974 (9th Cir.2002). "[A] preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion."Ma~urek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 1867, 138 L.Ed.2d 162 (1997). However, a preliminary injunction "is not a preliminaryadj ~dication on the ultimate merits."Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1423(9th Cir.1984)."[T]he findings of fact and conclusions of law made by a court granting a preliminary injunction are not binding at trial on the merits."University of Texas v. Camenisch,451 U.S. 390, 395, 101 S.Ct. 1830, 1834, 68 L.Ed.2d 175 (1981); see alsoSierra On-Line, 739 F.2d at 1423(for preliminary relief, the court need only find a probability that necessary facts will be established, not that such facts actually exist). In seeking mandatoryinjunctive relief in addition to a prohibitory injunction, Whittier acknowledgesthat some of the injunctive it seeks goes well beyond maintaining the status quo. Stanley v. University of S. Cal., 13 F.3d 1313, 1320 (9th Cir.1994) ("A prohibitory injunction preserves the status quo. A mandatoryinjunction 'goes well beyond simply maintaining the status quo pendente lite and is particularly disfavored.' When mandatory a preliminary injunction is requested, the district court should deny such relief 'unless the facts and law clearly favor the movingparty." ') (citations omitted) (quoting Anderson v. United States, 612 F.2d 1112, 1~14 (9th Cir.1979)); Martin v. International OlympicCor, vn., 740 F.2d 670, 675 (9th Cir.1984) ("In cases such as the one before us in which a party seeks mandatory preliminary

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relief that goes well beyondmaintaining the status quo pendente lite, courts should be extremely cautious about issuing a preliminary injunction."); Anderson,612 F.2d at 1115 (" '[M]andatory injunctions, however, are not granted unless extreme or very serious damage will result and are not issued in doubtful cases or where the injury complainedof is capable of compensationin damages."') (quoting Clune v. Publishers' Assn., 214 F.Supp. 520 (S.D.N.Y.1963)). III. Analysis *7 Although Whittier has characterized its claims as arising under "common law due process," because the ABA a private organization, it is more accurate to is characterize the claims as arising under Whittier's rights to "fair procedure." SeeThomas Cooley LawSchool v. M. ABA, 459 F.3d 705, 711 (6th Cir.2006) ("Manycourts, including this one, recognize that 'quasi-public' professional organizations and accrediting agencies such as the ABAhave a commonlaw duty to employ fair procedures when making decisions affecting their members. Courts developed the right to common due law process as a check on organizations that exercise significant authority in areas of public concern such as accreditation and professional licensing.") (citations omitted); see alsoApplebaum Bd. of Directors of Barton v. Mem'l Hosp., 104 Cal.App.3d 648, 657, 163 Cal.Rptr. 831,836 (1980) ("The distinction betweenfair procedure and due process rights appears to be one of origin and not of the extent of protection afforded an individual; the essence of both rights is fairness. Adequate notice of charges and a reasonable opportunity to respond are basic to bothsets of rights."). Whether a fair procedure claim is brought pursuant to federal or California law, the legal analysis a court performs is nearly identical. In assessing a federal fair procedure claim, courts review "only whetherthe decision of an accrediting agencysuch as the ABA arbitrary and is unreasonable or an abuse of discretion and whether the decision is based on substantial evidence."Thomas M. Cooley Law School, 459 F.3d at 712. Similarly, under California law, "an organization's decision to expel or exclude an individual maybe arbitrary either because the reason underlyingthe rejection is irrational or becausethe organization has proceeded in an unfair manner .... [W]henevera private association is legally required to refrain fromarbitrary action, the association's action must be both substantively rational and procedurally fair."Pinsker v. Pac. Coast Soc'y of Orthodontists, 12

Cal.3d 541, 550, 126 Cal.Rptr. 245, 251-52 (1974). Becauseof the similarities betweenfair procedureclaims, the Courtconcludesthat the result it reaches wouldbe the same whether it is analyzed under federal or California law. As a result, the Court, at least at this stage, neednot determine if Whittier's state law claim is preempted by federal law. CompareKeams Tempe Technical Inst., v. Inc., 39 F.3d 222 (9th Cir.1994) (finding no preemption of state law wrongful accreditation claim brought by student against accrediting agency) withThomas M. Cooley Law School, 459 F.3d at 712 ("Federal courts have exclusive jurisdiction over any action brought by a school challenging an accreditation decision madeby an organization approved by the Secretary (suc ~" as the ABA). This grant of exclusive federal jtaisdiction necessarily implies that federal law should govern disputes relating to decisions madeby those bodies. It wouldmakelittle sense for state law to governclaims that could not be heard in any state court.") (citing 20 U.S.C.§ 1099b(_f 2andChicago School of Automatic Transmissions, Inc. v. Accreditation Alliance of CareerSchools &Coils., 44 F.3d 447, 450 (7th Cir.1994) (declining to follow Keams )). *8 The standard of review on a fair procedure claim is even moredeferential than the review a court undertakes in an action brought pursuant to the Administrative Procedure Act: Although accrediting agencies perform a quasigovernmental function, they are still private organizations. Courts have madethe policy decision to ensure that these organizations act in the public interest and do not abuse their power, but judicial review is limited to protecting the public interest. Recognizing that "the standards of accreditation are not guides for the laymanbut for professionals in the field of ed,lcation," great deference should be afforded the substantiw: rules of these bodies and courts should focus on whether an accrediting agency such as the ABA followed a fair procedure in reaching its conclusions. Weare not free to conduct a de novo review or substitute our judgment for that of the ABA its Council. or ThomasM. Cooley LawSchool, 459 F.3d at 713 (citing 5 U.S.C. § 706(2)(A) and quoting Wilfred Acad. of Hair & Beauty Culture v. S. Ass'n of Colls. & Schools, 957 F.2d 210, 214 (5th Cir.1992)); see alsoid.("[I]n analyzing whether the ABA abused its discretion or reached a decision that was arbitrary or unreasonable, we focus on whether the agency 'conform[ed] its actions to

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fundamental principles of fairness." ') (quoting Med.Inst. of Minn. v. Nat'l Ass'n of Trade &Technical Schools, 817 F.2d 1310, 1314(9th Cir.1987)); W. State Univ. ors. Cal. v. American Bar Ass'n, 301 F.Supp.2d 1129, 1135 (C.D.Cal.2004)("I'he Court's review is very deferential, but review includes the inquiry whether the accrediting bodyfollowed its own rules."). A. Likelihood of Success on the Merits/Serious Questions

rate against the other ABA-approved schools in California. Indeed, that is precisely how Whittier measureditself whenresponding to the ABA's oncerns. ~ Put simply, and particularly in light of the "great deference" to whichthe decisions of the ABA entitled, are the Court finds that Whittier has failed to raise serious questions or to establish a likelihood of success on the merits of its claims. B. Irreparable Injury~Balanceof Hardships

Given the numberof hearings and opportunities Whittier has had to present evidence to the Committee and Council, it cannot seriously argue that the ABA violated its procedural rules. Whittier had adequate notice of each hearing, was provided with written decisions, was represented by counsel, was allowed to appear at hearings, was permitted to supplement the record with additional evidence, and took appeals of the Committee's adverse rulings to the Council. Instead, Whittier contends that despite the flexible guideline codified in Standard 301(a) and Interpretation 301-3, it has actually been subject to a far stricter "secret" numerical bar passage requirement. Relying on the December 2006 testimony of Mr. Askew before the United States Department of Education and the recent promulgation of proposed Interpretation 301-6, Whittier claims that this "unpublished and unapproved" criteria for bar passage rates has denied it a fair procedureby giving it no notice of the actual standard against which the ABAwas measuring it. The Court concludesthat Whittier has little likelihood of success on the merits of its claims. Nor has Whittier raised a serious question. Thereappears to be little that is new or different about either Mr. Askew'stestimony or proposed Interpretation 301-6. Both are, as Mr. Askew and proposed Interpretation 301-6 make clear, merely a "trigger" for further review. That further review, as Whittier appears to have known along, meas