Global Apogee v. Sugarfina, inc.

• Court: District Court, C.D. California
• Decided: October 15, 2021
• Docket: 2:18-cv-05162
• Status: Unknown

Opinion

1 'O' 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 CV 18-5162-RSWL-E x 12 GLOBAL APOGEE, ORDER re: Individual 13 Plaintiff, Defendants’ Motion to 14 v. Dismiss, or in the Alternative, Motion to 15 SUGARFINA, INC., et. al., Strike Plaintiff’s Second Amended Complaint [60] 16 Defendants. 17 18 19 Plaintiff Global Apogee (“Plaintiff”) filed this 20 Action [1] on June 11, 2018 against Defendants 21 Sugarfina, Inc. (“Sugarfina”), Joshua Resnick, and Rosie 22 O’Neill alleging trademark infringement among other 23 related claims. The Action arises out of Defendants’ 24 purported unauthorized use of Plaintiff’s federally 25 registered CANDY-GRAM service mark. 26 Before this Court is a Motion to Strike, or in the 27 alternative, Motion to Dismiss Plaintiff’s Second 28 1 Amended Complaint [60] filed by Defendants Joshua

2 Resnick and Rosie O’Neill (“Individual Defendants”).

3 For the following reasons, this Court DENIES as moot 4 Individual Defendants’ Motion to Strike and DENIES the 5 Motion to Dismiss. 6 I. BACKGROUND 7 Plaintiff alleges that Sugarfina infringed on its 8 federally registered CANDY-GRAM trademark. Plaintiff’s 9 Second Amended Compl. (“SAC”) ¶ 32, ECF No. 57. 10 Plaintiff further alleges that Individual Defendants, 11 who serve as co-founders and co-CEOs of Sugarfina, were 12 personally and directly involved in each of the 13 decisions regarding the infringing uses of the CANDY- 14 GRAM name by controlling and directing Sugarfina’s 15 activities through its executives, representatives, and 16 agents.1 SAC ¶ 32. 17 Plaintiff filed its Complaint [1] against Sugarfina 18 and Individual Defendants on June 11, 2018, asserting 19 claims related to Defendants’ allegedly unauthorized use 20 and infringement of Plaintiff’s federally registered 21 1 As support, Plaintiff points to a December 22, 2017 22 interview where Defendant O’Neill described her typical workday, which included tasks such as: leading team meetings, reviewing 23 new store designs, creating marketing campaigns for product launches, and coming up with product concepts for brand 24 collaborations. Id. ¶ 33. Defendant O’Neill also described the division of labor between the Individual Defendants in her 25 interview: Defendant Resnick handles the “back-of-house” operations, finance, human resources, and business development; 26 and Defendant O’Neill manages the “front-of-house,” which includes “everything that is visible to [their] customers.” Id. 27 Defendant O’Neill admitted in her interview that she “still does a lot of the design work [her]self” even after hiring personnel. 28 Id. 1 CANDY-GRAM trademark and its common law rights to the

2 CANDY-GRAM service mark.

3 On October 10, 2018, the Court granted in part [15] 4 Sugarfina’s Motion to Dismiss [9] with twenty-one days’ 5 leave to amend. On October 18, 2018, the Court entered 6 Plaintiff and Sugarfina’s Joint Stipulation [16], which, 7 among other things, extended Plaintiff’s deadline to 8 file an amended complaint to November 1, 2018. 9 On November 1, 2018, Plaintiff filed its First 10 Amended Complaint (“FAC”) [18], alleging five causes of 11 action: (1) federal trademark infringement in violation 12 of Section 32 of the Lanham Act, 15 U.S.C. § 1114; (2) 13 California common law unfair competition; (3) unfair 14 competition in violation of California Business and 15 Professions Code § 17200; (4) common law infringement of 16 trademark; and (5) common law infringement of service 17 mark. On November 21, 2018, Sugarfina filed its Answer 18 and Counterclaims against Plaintiff [20]. 19 Sugarfina filed a Notice of Filing Bankruptcy on 20 September 16, 2019 [37]. On April 14, 2020, the Court 21 stayed this Action [42] pending the Confirmation Hearing 22 in Sugarfina’s bankruptcy proceedings. On May 13, 2020, 23 the U.S. Bankruptcy Court for the District of Delaware 24 entered an order confirming Sugarfina’s Plan of 25 Reorganization, which became effective May 28, 2020. 26 See Update re: Status and Result of Bankruptcy Ct. Hr’g, 27 ECF No. 43; Supp. Notice re: Status and Result of 28 Bankruptcy Ct. Hr’g, ECF No. 44. 1 On September 8, 2020, the Court granted [48]

2 Sugarfina’s unopposed Motion to Enforce Plan Injunction

3 and Release Provisions [45], ordering Plaintiff to 4 dismiss its claims against Sugarfina and staying the 5 Action against Individual Defendants through May 28, 6 2021. On June 15, 2021, the Court dismissed Sugarfina 7 and Sugarfina’s Counterclaims against Plaintiff without 8 prejudice [55]. 9 Individual Defendants filed a Motion to Dismiss 10 Plaintiff’s First Amended Complaint [56] on June 18, 11 2021.2 Plaintiff filed a Second Amended Complaint 12 (“SAC”) [57] and Opposition [58] on June 29, 2021, and 13 Individual Defendants filed their Reply [59] on July 6, 14 2021. On July 23, 2021, this Court denied [63] 15 Individual Defendants’ Motion as moot and deemed the 16 Plaintiff’s SAC the operative complaint in this Action. 17 Individual Defendants filed the instant Motion to 18 Dismiss, or in the Alternative, Motion to Strike 19 Plaintiff’s SAC [60] on July 13, 2021. Plaintiff 20 opposed [62] the Motion on July 20, 2021, and Individual 21 Defendants replied [64] on July 27, 2021. 22 /// 23

24 2 Pursuant to the Court’s April 14, 2020 Order, Individual Defendants accepted service of the summons and complaint 25 effective as of the date the Court lifted the stay, with their response deadlines set for twenty-one days thereafter. See Order 26 Granting Joint Stipulation to Continue Trial Date and Pretrial Dates ¶ 4, ECF No. 42. The Action was stayed against Individual 27 Defendants through May 28, 2021, and accordingly their deadline 28 to respond was June 18, 2021. 1 II. DISCUSSION

2 A. Motion to Strike Plaintiff’s SAC

3 Individual Defendants’ Motion to Strike the SAC for 4 being improperly filed is denied as moot because the 5 issue has already been addressed. On July 23, 2021, 6 this Court denied Individual Defendants’ Motion to 7 Dismiss the FAC [56] and deemed the SAC the operative 8 Complaint in this Action. See generally Order re: 9 Individual Defs.’ Mot. to Dismiss FAC (“Order”), ECF No. 10 63.3 Consequently, the Court need not consider either 11 party’s arguments as to whether the SAC was properly 12 filed under Rules 15 and 16. 13 B. Motion to Dismiss Plaintiff’s SAC 14 Federal Rule of Civil Procedure (“Rule”) 12(b)(6) 15 allows a party to move for dismissal on one or more 16 claims if a pleading fails to state a claim upon which 17 relief can be granted. Under Rule 8(a), a complaint 18 must contain “a short and plain statement of the claim 19 showing that the pleader is entitled to relief” to give 20 the defendant “fair notice of what the . . . claim is 21 and the grounds upon which it rests.” Bell Atl. Corp. 22 v. Twombly, 550 U.S. 544, 555 (2007); see also Fed. R. 23 Civ. P. 8(a). Dismissal is proper “where the complaint 24 lacks a cognizable legal theory or sufficient facts to 25 3 Individual Defendants’ instant Motion offers the same 26 “procedurally defective” argument that was already analyzed and rejected in the Order [63]. As the Court noted there, requiring 27 Plaintiff to file a formal motion and refile the SAC would make 28 “little practical sense and waste resources.” Order 11:19-21. 1 support a cognizable legal theory.” Mendiondo v.

2 Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir.

3 2008) (citing Balistreri v. Pacifica Police Dep’t, 901 4 F.2d 696, 699 (9th Cir. 1988)). 5 “To survive a motion to dismiss, a complaint must 6 contain sufficient factual matter, accepted as true, to 7 ‘state a claim to relief that is plausible on its 8 face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 9 (quoting Twombly, 550 U.S. at 570). While a complaint 10 need not contain detailed factual allegations, it must 11 provide more than “labels and conclusions” or “a 12 formulaic recitation of the elements of a cause of 13 action.” Twombly, 550 U.S. at 555. The plaintiff must 14 allege enough facts “to raise a right to relief above 15 the speculative level.” Id. In evaluating a Rule 16 12(b)(6) motion, a court must take all well-pleaded 17 allegations of material fact as true and construe them 18 in the light most favorable to the nonmovant. Great 19 Minds v. Off. Depot, Inc., 945 F.3d 1106, 1109 (9th Cir. 20 2019). A court may generally consider only “the 21 complaint itself and its attached exhibits, documents 22 incorporated by reference, and matters properly subject 23 to judicial notice.” In re NVIDIA Corp. Sec. Litig., 24 768 F.3d 1046, 1051 (9th Cir. 2014). 25 As a threshold matter, Plaintiff contends that 26 Individual Defendants waived the right to move to 27 dismiss, pursuant to Rule 12(g)(2), by failing to timely 28 bring a Rule 12(b)(6) motion against the Original 1 Complaint. Mot. 11:8-9. The Court disagrees.

2 As the Court previously addressed in the Order, the

3 parties had stipulated that Individual Defendants only 4 accepted service as of May 28, 2021. See Order 6:8-27 5 (referencing the parties’ Joint Stipulation [40] entered 6 on April 9, 2020). The Court gave Individual Defendants 7 twenty-one days to respond from that date, and 8 Individual Defendants timely filed a Motion to Dismiss 9 FAC [56] on June 18, 2021. Moreover, Individual 10 Defendants have not waived their right to bring this 11 Motion because defendants do not have to respond to a 12 pleading until they have been properly served. Fed. R. 13 Civ. P. 12(a)(1)(A). Therefore, Individual Defendants’ 14 Motion to Dismiss (“Motion”) is procedurally proper. 15 Individual Defendants move to dismiss the SAC with 16 prejudice for two reasons: (1) the SAC fails to state a 17 claim against Defendants as required by Rule 12(b)(6); 18 and (2) amendment would be futile because the only facts 19 that can be offered are in the SAC, and they are plainly 20 insufficient. See generally Mot. Individual Defendants 21 move to dismiss all of Plaintiff’s claims: (1) federal 22 trademark infringement in violation of Section 32 of the 23 Lanham Act, 15 U.S.C. § 1114; (2) California common law 24 unfair competition; (3) unfair competition in violation 25 of California Business and Professional Code § 17200; 26 (4) common law infringement of trademark; and (5) common 27 law infringement of service mark. Mot. 7:3-8; see 28 generally SAC. 1 1. Individual Liability for Federal

2 Trademark Infringement

3 Individual Defendants move to dismiss Plaintiff’s 4 first cause of action for failure to state a claim upon 5 which relief may be granted. First, Individual 6 Defendants argue that it is not sufficient to plead 7 trademark infringement against the officers and 8 directors of an allegedly infringing corporation based 9 solely upon [their] status as officers and directors. 10 Mot. 1:19-24. 11 Corporate officers and directors that personally 12 authorize, direct, or are otherwise directly involved in 13 a company’s infringing conduct may be individually 14 liable for the company’s trademark infringement. Comm. 15 for Idaho’s High Desert, Inc. v. Yost, 92 F.3d 814, 823 16 (9th Cir. 1996); see also Transgo, Inc. v. Ajac 17 Transmission Parts Corp., 768 F.2d 1001, 1021 (9th Cir. 18 1985) (“The officer must personally take part in 19 infringing activities or specifically direct employees 20 to do so.”). 21 Corporate officers are “personally liable for a 22 corporation’s trademark infringements when they are a 23 ‘moving, active conscious force’ behind the 24 corporation’s infringement.” Talent Mobile Dev., Inc. 25 v. Headios Grp., 382 F. Supp. 3d 953 (C.D. Cal. 2019) 26 (quoting Daimler AG v. A-Z Wheels LLC, 334 F. Supp. 3d 27 1087, 1006 (S.D. Cal. 2018)). Showing that the 28 individual generally controls the company’s business 1 affairs is insufficient to allege personal liability.

2 See, e.g., 19 Tao Vega LLC v. Holo Ltd., No. C 19-5640

3 SBA, 2019 WL 8263434, at *4 (N.D. Cal. 2019) (requiring 4 that the officer personally participate in the 5 infringement); Facebook, Inc. v. Power Ventures, Inc., 6 844 F.3d 1058, 1069 (9th Cir. 2016) (“Cases finding 7 ‘personal liability on the part of corporate officers 8 have typically involved instances where the defendant 9 was the “guiding spirit” behind the wrongful conduct, or 10 the “central figure” in the challenged corporate 11 activity.’”). 12 As a threshold matter, Individual Defendants 13 incorrectly relied on authority from Lauter and Deckers 14 in their Motion and Reply. The courts in Lauter and 15 Deckers analyzed individual liability under an alter ego 16 theory, which requires a higher pleading standard.4 See 17 generally Lauter v. Rosenblatt, No. CV 15–08481, 2017 WL 18 6205784 (C.D. Cal. 2017) (dismissing plaintiffs’ claims 19 because they could not allege enough facts to satisfy 20 the elements of an alter ego theory); Deckers Outdoor 21 Corp. v. Bright Trading Corp., No. CV14-00198, 2014 WL 22 12564124 (C.D. Cal. 2014)(same). By contrast, while 23

24 4 “The alter ego doctrine arises when a plaintiff [claims] that an opposing party is using the corporate form unjustly and 25 in derogation of the plaintiff’s interests. In certain circumstances the court will disregard the corporate entity and 26 will hold the individual shareholders liable for the actions of the corporation.” Lauter v. Rosenblatt, No. CV 15-08481, 2017 WL 27 6205784, at *7 (citing Nielson v. Union Bank of Cal., 290 F. 28 Supp. 2d 1101, 1115 (C.D. Cal. 2003)). 1 personal liability for trademark infringement is also at

2 issue here, there is no allegation that Individual

3 Defendants, in their capacities as officers, acted as 4 “alter egos” to Sugarfina. Therefore, the standard 5 under Lauter and Deckers does not apply to support 6 Individual Defendants’ arguments. 7 Although the two theories are similar, there is a 8 significant difference: proving liability under the 9 alter ego doctrine requires a showing that the 10 individual pierced the corporate veil, which is not 11 necessary when proving liability to hold corporate 12 officers personally liable for a corporation’s trademark 13 infringements. Compare Babbit Elecs., Inc. v. Dynascan 14 Corp., 38 F.3d 1161, 1184 (11th Cir. 1994)(“[A] 15 corporate officer who directs, controls, ratifies, 16 participates in, or is the moving force behind the 17 infringing activity, is personally liable for such 18 infringement without regard to piercing of the corporate 19 veil.”)(emphasis added), with Nielson v. Union Bank of 20 Cal., 290 F. Supp. 2d 1101, 1115 (C.D. Cal. 2003)(“The 21 alter ego doctrine arises when a plaintiff [alleges] 22 that an opposing party is using the corporate form 23 unjustly . . . [sometimes] the court will disregard the 24 corporate entity and will hold the individual 25 shareholders liable for the actions of the 26 corporation.”). Consequently, Defendants’ comparisons 27 to cases using the alter ego standard are unpersuasive. 28 Individual Defendants rely on Apple Hill Growers, 1 where a court dismissed a plaintiff’s complaint because

2 it merely included a “conclusory statement that

3 Defendants . . . undert[ook] to control and direct the 4 infringing activities of [their company] by virtue of 5 their roles as corporate officers and owners.” Apple 6 Hill Growers v. El Dorado Orchards, No. 2:17-cv-02085- 7 TLN-CKD, 2019 WL 5827365, at *3 (E.D. Cal. 2019)(holding 8 that defendants’ personal involvement in the purported 9 trademark infringement was insufficiently alleged). 10 There, the plaintiff contended that it was “reasonable 11 to infer” that defendants, simply by virtue of their 12 roles, controlled and directed their company’s allegedly 13 infringing activities with no additional facts about any 14 specific actions taken. Id. Although Apple Hill 15 Growers discusses the relevant standard for officer 16 liability, it is nevertheless distinguishable on the 17 facts. 18 Here, Plaintiff does not merely rely on Individual 19 Defendants’ roles as corporate officers of Sugarfina in 20 alleging their liability for trademark infringement. In 21 its SAC, Plaintiff alleges that Individual Defendants 22 took specific actions related to trademark infringement: 23 Defendants personally assisted in the development 24 of every aspect of Sugarfina . . . Defendant O’Neill stated [in an interview] that ‘her typical 25 workday [is filled] with [team meetings].’ 26 [Defendant O’Neill] also stated that . . . she ‘still does a lot of the design work herself . . . 27 [she] handle[s] . . . product, packaging, branding, marketing, sales, retail stores and the website. 28 1 [fIinndainvcied,u ahlu maDne freensdoaunrtc]e sR,e sbnuiscikn ehsasn ddleevse looppemreantti oannsd,

2 legal.’ Defendants also had control of . . . and appointed p ersonnel to run Sugarfina.5 3 4 SAC at 13:16-14:10. 5 Unlike the plaintiff in Apple Hill Growers, here, 6 Plaintiff offers sufficient facts to support Individual 7 Defendants’ personal involvement in the alleged 8 infringement without relying solely on their roles as 9 co-CEOs of Sugarfina. Plaintiff points to Defendant 10 O’Neill’s detailed statements regarding her and 11 Defendant Resnick’s involvement in the daily activities 12 and decision-making of Sugarfina; for example, it may be 13 reasonably inferred from Defendant O’Neill’s purported 14 control over Sugarfina’s website, product design, and 15 retail stores that she was personally involved in the 16 alleged infringing conduct of Sugarfina. See SAC ¶¶ 24- 17 26 (describing Sugarfina’s advertisement of the “CANDY- 18 GRAM” trade name as a product on its website and on 19 retail store kiosks). 20 Because Individual Defendants allegedly hired 21 personnel, participated in team meetings with personnel, 22 and continue to handle design work or manage daily 23 operations, it is plausible that the Individual 24 5 Plaintiff cited direct quotes from Individual Defendant 25 O’Neill’s interview with Forbes magazine. Elena Lyn Gross, How Sugarfina’s Founders Built A Million-Dollar (And Very 26 Instagrammable) Candy Company, FORBES (Dec. 22, 2017), https://www.forbes.com/sites/elanagross/2017/12/22/how- 27 sugarfinas-founders-built-a-million-dollar-and-very- 28 instagrammable-candy-boutique/?sh=314f244d457a. 1 Defendants could have been the “guiding spirits” behind

2 the allegedly infringing conduct, either by personally

3 taking part in it or directing their employees to do so. 4 The SAC alleges specified roles that go beyond asserting 5 that Individual Defendants only had general control over 6 Sugarfina, and it is therefore sufficient to survive a 7 motion to dismiss. Cf. Bravado Int’l Grp. Merch. 8 Servs., Inc. v. Gearlaunch, Inc., No. CV-16-8657-MWF 9 (CWx), 2018 WL 6074553, at *1-2 (C.D. Cal May 1, 2018) 10 (denying motion to dismiss trademark infringement claims 11 where plaintiff alleged that defendants were in charge 12 of inspecting products and printing operations, publicly 13 commented on lawsuits on behalf of the company, and 14 oversaw infringement procedures yet failed to take 15 action against alleged infringement). 16 Furthermore, Individual Defendants’ argument 17 (relying on the outcome of Transgo) that Plaintiff is 18 not sufficiently specific about Individual Defendants’ 19 particular roles in the infringement is refuted by the 20 Bravado court: 21 [T]he Court notes that both Townsley and 22 Transgo were decided on full evidentiary records, not motions to dismiss. Therefore, 23 the courts in those cases were able to point to 24 specific pieces of evidence that supported personal liability. At this stage of the 25 proceedings, although it may be a “close” call . . . Plaintiffs have alleged enough to 26 withstand a motion to dismiss. As discussed at 27 the hearing, discovery will reveal the true extent of [Defendant]’s role in the allegedly 28 1 infringing conduct.

2 Id. at *4. Here, Plaintiff has alleged enough to

3 withstand a motion to dismiss, and the details behind 4 Individual Defendants’ specified roles may be revealed 5 through discovery. 6 In sum, given that the facts have risen above a 7 speculative level, the SAC’s first cause of action 8 survives dismissal. 9 2. California Common Law Unfair 10 Competition, Common Law Trademark 11 Infringement, and Common Law Service Mark 12 Infringement 13 Plaintiff has sufficiently alleged trademark 14 infringement under the Lanham Act; consequently, 15 Plaintiff has also sufficiently alleged its second claim 16 for California common law unfair competition, fourth 17 claim for common law trademark infringement, and fifth 18 claim for common law service mark infringement. 19 “[F]ederal and state laws regarding trademarks and 20 related claims of unfair competition are substantially 21 congruent.” Int’l Order of Job’s Daughters v. Lindeburg 22 & Co., 633 F.2d 912, 916 (9th Cir. 1980); see also Grey 23 v. Campbell Soup Co., 650 F. Supp. 1166, 1173 (C.D. Cal. 24 1986)(“[T]he tests for infringement of a federally 25 registered mark under § 32(1), 15 U.S.C. § 1114(1), 26 infringement of a common law trademark, unfair 27 competition under § 43(a), 15 U.S.C. § 1125(a), and 28 1 common law unfair competition involving trademarks are

2 the same.”). Because these claims are congruent with

3 trademark infringement, they are not dismissed. 4 3. Unfair Competition in Violation of 5 California Business and Professional Code § 6 17200 7 Individual Defendants assert that Plaintiff’s third 8 cause of action for violation of California’s UCL Unfair 9 Competition Law (“UCL”) should also be dismissed under 10 Rule 12(b)(6). Mot. 10:20-23. Individual Defendants 11 offer two reasons: (1) Plaintiff fails to plead any 12 sufficient facts with reasonable particularity for 13 alleged unlawful, unfair, or fraudulent conduct in 14 violation of the UCL; and (2) because Plaintiff’s 15 substantive causes of action fail, Plaintiff’s UCL claim 16 based upon those causes of action must fail as well. 17 See Mot. 11:19-23, 12:1-11. Both are unavailing. 18 The UCL imposes liability for an “unlawful, unfair 19 or fraudulent business act or practice . . . .” Cal. 20 Bus. & Prof. Code § 17200. An action for unfair 21 competition under the UCL is “substantially congruent” 22 to a trademark infringement claim under the Lanham Act. 23 Acad. of Motion Picture Arts & Scis. v. Creative House 24 Promotions, Inc., 944 F.2d 1446, 1457 (9th Cir. 1991). 25 “Under both [the UCL and the Lanham Act], the ‘ultimate 26 test’ is ‘whether the public is likely to be deceived or 27 confused by the similarity of the marks.’” Id. 28 (citations omitted). 1 Plaintiff has alleged a UCL violation based on the

2 same elements required for its trademark infringement

3 claim. See SAC ¶¶ 65, 67 (“Defendants’ unfair 4 competition includes . . . representing in advertising 5 and marketing materials . . . that CANDY-GRAM is owned 6 or controlled by Defendants, causing confusion among 7 dealers and consumers . . . [this conduct] constitutes 8 unlawful, unfair, and fraudulent business practices in 9 violation of Cal. Bus. & Prof. Code § 17200.”). 10 (emphasis added). Because Plaintiff’s other substantive 11 claims survive dismissal, Plaintiff’s UCL claim based 12 upon those causes of action similarly survives 13 dismissal. 14 III. CONCLUSION 15 Based on the foregoing, the Court DENIES as moot 16 Individual Defendants’ Motion to Strike and DENIES the 17 Motion to Dismiss. 18 IT IS SO ORDERED. 19 20 DATED: October 15, 2021 ___/_s/_ R_on_a_ld_ S_.W__. L_e_w____________ HONORABLE RONALD S.W. LEW 21 Senior U.S. District Judge 22 23 24 25 26 27 28