Certified Nutraceuticals Inc. v. The Clorox Company

• Court: District Court, S.D. California
• Decided: February 19, 2020
• Docket: 3:18-cv-00744
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CERTIFIED NUTRACEUTICALS, Case No.: 18-cv-00744 W (KSC) INC. a California corporation, 12 ORDER: Plaintiff, 13 v. DENYING DEFENDANT SARAH 14 QUADRI AND FATMA THE CLOROX COMPANY, a 15 BOUKHARI’S MOTION FOR Delaware Corporation; NEOCELL ATTORNEY’S FEES [DOC. 56] 16 CORPORATION, a California Corporation; NEOCELL HOLDING 17 COMPANY, a Delaware Limited 18 Liability Company; NUTRANEXT, a Delaware Corporation; AVICENNA 19 NUTRACEUTICAL, 20 LLC, a Georgia Limited Liability Company; and DOES 1 through 10, 21 inclusive, 22 Defendants. 23 24 Pending before the Court is Defendant Sarah Quadri and Fatma Boukarhi’s 25 (collectively, “Individual Defendants”) motion for attorney’s fees. [Doc. 56.] The Court 26 decides the matter without oral argument pursuant to Civil Local Rule 7.1(d)(1). For the 27 reasons that follow, the Court DENIES Defendants’ motion for attorney’s fees. 28 // 1 I. BACKGROUND 2 This case was initially filed by the Plaintiff, Certified Nutraceuticals, against 3 Defendants, The Clorox Company, Neocell Corporation, Neocell Holding Company, 4 Nutranext, Sarah Quadri, Fatma Boukhari, Avicenna Nutraceutical LLC, and Does 1 5 through 10. The original complaint alleged false advertising in violation of the Lanham 6 Act, false designation of origin in violation of the Lanham Act, unfair competition, and 7 false advertising. 8 The Plaintiff filed a Second Amended Complaint (“SAC”) which alleged that 9 Defendants, The Clorox Company, Neocell Holding Company, and Nutranext, are 10 retailers that sell dietary supplements using raw materials provided by the Plaintiff’s 11 competitor, Defendant Avicenna Nutraceutical, LLC (“Avicenna”). The SAC alleged 12 that Defendants “have been falsely passing off inferior products as Chicken Sternum 13 Collagen Type II[,]” which is contained in the Plaintiff’s product. (SAC [Doc 21] ¶¶ 16, 14 20, 23.) Additionally, the SAC alleged Avicenna sold its raw materials at a lower market 15 rate giving them an unfair competitive advantage and that Avicenna knew or should have 16 known their practices were deceptive. (SAC ¶ 23.) The SAC alleged the Individual 17 Defendants are the principals of Defendants Neocell Holding Company, Nutranext, and 18 The Clorox Company. (SAC ¶¶ 20, 21.) 19 On May 6, 2019, the Individual Defendants filed a motion to dismiss for failure to 20 state a claim. [Doc. 42.] The Court found that the SAC did not claim misrepresentation 21 by the Individual Defendants; nor did the SAC allege with particularity any facts that 22 could give rise to individual liability on behalf of the Individual Defendants. (Order 23 Granting Defs.’ Mot. Dismiss [Doc. 49] 5:2-4.) The Plaintiff was warned of these 24 deficiencies when the Individual Defendants served the Plaintiff with a draft Rule 11 25 motion that demanded dismissal from the case. (Defs.’ Mot. Attorney Fees [Doc. 56] 26 6:22-26.) The Plaintiff nevertheless continued with its claims, filing an opposition to the 27 motion to dismiss. (Id. at 7:1.) The Court granted the Individual Defendants’ motion to 28 dismiss with leave to amend on June 10, 2019. (Order Granting Defs.’ Mot. Dismiss.) 1 The Plaintiff filed a Third Amended Complaint in compliance with the June 10, 2019 2 order and did not name the Individual Defendants. (TAC [Doc 50].) Approximately 3 three months later, the Individual Defendants filed this motion for attorney’s fees in the 4 amount of $73,805.20 pursuant to the Lanham Act (15 U.S.C. § 117(a)). 5 6 II. LEGAL STANDARD 7 Section 35(a) of the Lanham Act provides that “[t]he court in exceptional cases 8 may award reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117(a). “A 9 ‘prevailing party’ is one who has been awarded some relief by the court.” Buckhannon 10 Bd. & Care Home, Inc. v. W. Va. Dept. of Health & Human Res., 532 U.S. 598, 603 11 (2001). Prevailing party status rests on a judicial sanction that materially alters the 12 parties’ legal relationship. Klamath Siskiyou Wildlands Ctr v. U.S. Bureau of Land 13 Mgmt., 589 F.3d 1027, 1031 (9th Cir. 2009). Judgments on the merits and court-ordered 14 decrees create a material alteration of the parties legal relationship and permit an award. 15 Buckhannon, 532 U.S. at 598. Yet, a defendant’s voluntary change in conduct, although 16 accomplishing what the plaintiff sought to achieve, “lacks the necessary judicial 17 imprimatur on the change.” Id. at 598–98. 18 Not only does the party requesting fees need to be the prevailing party, but the 19 court must also determine the case is an exceptional one to grant the award. See § 20 1117(a). To determine if a case is exceptional, the Supreme Court has held that a district 21 court should look to the totality of the circumstances to determine if the infringement was 22 exceptional. Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 23 (2014). “[A]n ‘exceptional’ case stands out from others with respect to the substantive 24 strength of a party’s litigating position . . . or the unreasonable way in which the case was 25 litigated.” Id. Specifically, the court looks to a “‘nonexclusive’ list of ‘factors’ including 26 ‘frivolousness, motivation, objective unreasonableness (both in the factual and legal 27 components of the case) and the need in particular circumstances to advance 28 considerations of compensation and deterrence.’” SunEarth, Inc. v. Sun Earth Solar 1 Power Co.,839 F.3d 1179, 1181 (9th Cir. 2016) (citing Octane Fitness, 572 U.S. at 558 2 n.6). 3 4 III. DISCUSSION 5 The issue here is whether the Individual Defendants are the prevailing party as a 6 result of the order granting the motion to dismiss. The Plaintiff argues the Individual 7 Defendants are not the prevailing party because the order granted the dismissal with leave 8 to amend. (See Pl.s’ Opp’n [Doc. 58].) The Individual Defendants counter, arguing they 9 are the prevailing party because the Plaintiff is precluded from refiling its claim against 10 them. (See Defs.’ Reply [Doc. 60] 4:1-2.) 11 A dismissal without prejudice does not materially alter the legal relationship of the 12 parties. U.S. v. Milner, 583 F.3d 1174, 1196–97 (9th Cir. 2009). This is because the 13 defendant remains subject to the risk of refiling. Id. However, a defendant is the 14 prevailing party if the plaintiff is precluded from refiling the claim against the defendant. 15 Cadkin v. Loose, 569 F.3d 1142, 1149 (9th Cir. 2009). 16 Here, the Court granted the Individual Defendants’ motion to dismiss with leave to 17 amend. This gave the Plaintiff the opportunity to refile its claim against the Individual 18 Defendants. Even though the Plaintiff did not include the Individual Defendants in its 19 Third Amended Complaint, the fact that the Plaintiff chose not to does not mean they 20 cannot add the Individual Defendants at a later date. See Buckhannon, 532 U.S. at 605 21 (explaining voluntary conduct lacks judicial imprimatur and does not constitute a judicial 22 sanction.) Although the order granting the motion to dismiss conditioned the amended 23 pleading to be filed on or before June 24, 2019, the Plaintiff still has an opportunity to 24 ask the Court’s permission to refile against the Individual Defendants in a Fourth 25 Amended Complaint. Because the Plaintiff can ask the Court’s permission to file a 26 Fourth Amended Complaint, the Plaintiff is not yet precluded from refiling the claim 27 against the Individual Defendants. Thus, the Individual Defendants are not the prevailing 28 party. 1 Because we have concluded the Individual Defendants are not the prevailing party, 2 || we need not discuss whether this case is an exceptional one pursuant to the Lanham Act. 3 4 ||IV. CONCLUSION & ORDER 5 For the foregoing reasons, the Court DENIES the Individual Defendants’ motion 6 || for attorney’s fees [Doc. 56]. 7 8 IT IS SO ORDERED. 9 Dated: February 19, 2020 \

11 Hn. 1 omas J. Whelan 12 United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28