LegalForce RAPC Worldwide P.C. v. Demassa

Opinion

1 2 5 6 LEGALFORCE RAPC WORLDWIDE Case No. 18-cv-00043-MMC P.C., 7 ORDER GRANTING IN PART AND Plaintiff, DENYING IN PART DEFENDANT'S 8 SECOND MOTION FOR SUMMARY v. JUDGMENT 9 CHRIS DEMASSA, Re: Doc. Nos. 207, 214 10 Defendant.

11 12 Before the Court is defendant Chris DeMassa's second Motion for Summary 13 Judgment, filed March 23, 2020.1 Plaintiff LegalForce RAPC Worldwide, P.C. has filed 14 opposition, to which defendant has replied. Having read and considered the papers filed 15 in support of and in opposition to the motion, the Court rules as follows. 17 In the operative complaint, the Second Amended Complaint ("SAC"), plaintiff, a 18 law firm, asserts three Claims for Relief against defendant, who, plaintiff alleges, is "not a 19 licensed attorney" (see SAC ¶ 8) and "operates a number of different trademark 20 preparation websites" (see SAC ¶ 2). According to the SAC, plaintiff and defendant 21 "compete to provide small businesses with affordable access to legal services that allow 22 them to protect their marks through preparation and filing with the U.S. Patent and 23 Trademark Office ['PTO']." (See SAC ¶ 3.) In the First, Second, and Third Claims for 24 Relief, which claims are brought, respectively, under the Lanham Act, California's Unfair 25 Competition Law, and California's False Advertising Law, plaintiff alleges defendant's 26 1By order filed March 20, 2020, the Court granted defendant's motion for leave to 27 file a second motion for summary judgment, and advised the parties the matter would be 1 website contains false and misleading statements, in particular, statements that 2 defendant employs attorneys. In the Second Claim for Relief, plaintiff additionally alleges 3 defendant is engaged in the unauthorized practice of law. 4 By order filed December 16, 2019, the Court denied defendant's first motion for 5 summary judgment, finding defendant, who at that time was proceeding pro se, had failed 6 to meet his initial burden to show his entitlement to summary judgment.2 Thereafter, the 7 Court appointed counsel to represent defendant, and, as noted, subsequently granted 8 defendant's motion for leave to file a second motion for summary judgment. 10 Pursuant to Rule 56 of the Federal Rules of Civil Procedure, a "court shall grant 11 summary judgment if the movant shows that there is no genuine issue as to any material 12 fact and that the movant is entitled to judgment as a matter of law." See Fed. R. Civ. P. 13 56(a). 14 The Supreme Court's 1986 "trilogy" of Celotex Corp. v. Catrett, 477 U.S. 317 15 (1986), Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986), and Matsushita Electric 16 Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 (1986), requires that a party seeking 17 summary judgment show the absence of a genuine issue of material fact. A moving party 18 who does not have the "ultimate burden of persuasion at trial" may meet its initial burden 19 to show entitlement to summary judgment by "show[ing] that the nonmoving party does 20 not have enough evidence of an essential element of its claim or defense to carry its 21 ultimate burden of persuasion at trial." See Nissan Fire & Marine Ins. Co. v. Fritz Cos., 22 210 F.3d 1099, 1102 (9th Cir. 2000). Put another way, the movant may meet its initial 23 burden "by showing – that is, pointing out to the district court – that there is an absence 24 of evidence to support the nonmoving party's case." See id. at 1105 (internal quotation 25 and citation omitted). Alternatively, the moving party may meet its initial burden by 26 2 In addition, in the same order, the Court denied plaintiff's motion for summary 27 judgment on its claim asserting defendant is engaging in the unauthorized practice of law, 1 "produc[ing] evidence negating an essential element of the nonmoving party's claim." 2 See id. at 1102. 3 Where the party moving for summary judgment has met its initial burden to 4 "demonstrate the absence of a material fact," see Celotex Corp., 477 U.S. at 323, the 5 nonmoving party, to defeat the motion, must, by affidavits or other evidence, "designate 6 specific facts showing that there is a genuine issue for trial," see id. at 324 (internal 7 quotation and citation omitted). 9 Defendant seeks summary judgment on each of plaintiff's Claims for Relief. The 10 Court considers the three Claims, in turn. 11 A. First Claim for Relief: Lanham Act 12 In the First Claim for Relief, titled "False Advertising and Unfair Competition 13 [Under] the Lanham Act, 15 U.S.C. § 1125(a)," plaintiff, as noted, alleges defendant has 14 made false and misleading statements on his websites.3 15 1. Liability 16 The Lanham Act does not protect a "consumer who is hoodwinked into purchasing 17 a disappointing product," but, rather, an individual or entity, such as a competitor, that 18 incurs "an injury to a commercial interest in reputation or sales." See Lexmark Int'l, Inc. 19 v. Static Control Components, Inc., 572 U.S. 118, 131-32 (2014). Specifically, a plaintiff 20 must prove the following elements: "(1) a false statement of fact by the defendant in a 21 commercial advertisement about its own or another's product; (2) the statement actually 22 deceived or has the tendency to deceive a substantial segment of its audience; (3) the 23 deception is material, in that it is likely to influence the purchasing decision; (4) the 24 3 Defendant asserts the Lanham Act claim is also based on defendant's "use of 25 advertising keywords" and argues such a claim is not cognizable. (See Def.'s 18:11-13.) Although the SAC does refer to defendant's having "outbid" plaintiff for certain "keywords" 26 (see SAC ¶ 38), the Lanham Act claim does not seek relief based on any such occurrence (see SAC ¶¶ 62-69; see also Joint Case Management Statement, filed 27 February 1, 2019, at 2:21-22 (describing Lanham Act claim as based on defendant's 1 defendant caused its false statement to enter interstate commerce; and (5) the plaintiff 2 has been or is likely to be injured as a result of the false statement, either by direct 3 diversion of sales from itself to defendant or by a lessening of the goodwill associated 4 with its products." See Skydive Arizona, Inc. v. Quattrocchi, 673 F.3d 1105, 1110 (9th 5 Cir. 2012). 6 Defendant argues plaintiff lacks evidence to establish the allegedly false 7 statements were "material," i.e., that his advertising was "likely to influence the 8 purchasing decision" of consumers, and, in addition, that plaintiff lacks evidence to 9 establish defendant's allegedly false advertising "caused any diversion of sales from 10 [plaintiff] to [defendant]." (See Def.'s Mot. at 14:1-10.) As defendant has not offered 11 affirmative evidence to show there is no likelihood of influence and no diversion of sales, 12 defendant, to meet his initial burden, must show plaintiff has no evidence to the contrary. 13 See Nissan Fire & Marine Ins. Co., 210 F.3d at 1106 (setting forth "two methods" of 14 meeting initial burden). 15 In that regard, defendant points out that neither of the two expert reports plaintiff 16 has disclosed includes any opinion as to whether the allegedly false advertisements 17 would have influenced consumers or caused consumers to do business with defendant 18 instead of plaintiff (see Kim Decl. Exs. E-F),4 and that he "did not receive a notice of 19 deposition subpoena from [plaintiff] for the deposition of any of [his] customers" (see 20 DeMassa Decl. ¶ 7). Defendant has not shown, however, plaintiff's only way to prove 21 influence and diversion is by an expert opinion or customer testimony, at least in the 22 absence of, for example, an interrogatory response effectively acknowledging a lack of 23 other evidence.5 Consequently, defendant has failed to meet his initial burden to show 24 4 One expert provided a damages calculation (see Kim Decl. Ex. F), and the other 25 offered an opinion as to the methodology utilized in a survey (see id. Ex. E). 26 5 The Court recognizes the limitations faced by defendant's counsel as a result of the timing of their appointment. During the entirety of the period in which discovery was 27 open, defendant proceeded pro se and has acknowledged he took no discovery during 1 plaintiff lacks evidence to prove those elements. See Nissan Fire & Marine Ins. Co., 210 2 F.3d at 1106. 3 Moreover, as plaintiff points out, where an advertisement is "literally false," courts 4 "assume [those] false statements actually mislead consumers" and such statements "are 5 presumed material." See POM Wonderful LLC v. Purely Juice, Inc., 2008 WL 4222045, 6 at *11 (C.D. Cal. July 17, 2008) (collecting cases). Here, plaintiff claims defendant states 7 on his website he "has a staff of 21, including 5 trademark attorneys" and, in support 8 thereof, has attached to the SAC a printout of a webpage containing the statement. (See 9 SAC ¶ 17, Ex. C.) Defendant has not offered evidence that his staff includes attorneys or 10 that plaintiff lacks evidence to show it does not, nor, at least in the context of the instant 11 motion, has defendant shown the challenged statement is not, as a matter of law, literally 12 false. 13 Accordingly, defendant has failed to show he is entitled to summary judgment on 14 the issue of liability. 15 2. Remedies 16 The possible remedies available for a violation of the Lanham Act are injunctive 17 relief, see 15 U.S.C. § 1116(a), damages sustained by the plaintiff, see 15 U.S.C. 18 § 1117(a), and the defendant's profits, see id. Defendant argues plaintiff lacks evidence 19 to establish its entitlement to any of those possible remedies. 20 With respect to injunctive relief, defendant argues plaintiff has not, either in 21 support of its motion for summary judgment,6 or in any other filing, offered evidence to 22 show it has suffered, or in the absence of an injunction will suffer, irreparable injury. 23 Defendant does not contend, however, there is any filing in which plaintiff made a 24 statement even suggesting it lacks such evidence or from which the Court otherwise 25 could find plaintiff is foreclosed from establishing its entitlement to injunctive 26 27 1 relief.7 Consequently, the absence of such evidence in the current record is not a basis 2 on which summary judgment may be granted. See Nissan Fire & Marine Ins. Co., 210 3 F.3d at 1105 (holding party moving for summary judgment may not "require the 4 nonmoving party to produce evidence supporting its claim . . . simply by saying that the 5 nonmovant has no such evidence"; explaining movant may not "use a summary judgment 6 motion as a substitute for discovery"). 7 Accordingly, defendant has failed to show he is entitled to summary judgment on 8 the issue of plaintiff's entitlement to injunctive relief under the Lanham Act. 9 With respect to damages, defendant submits copies of complaints filed by plaintiff 10 in other actions, in which pleadings plaintiff claimed various advertising practices, 11 unauthorized practices of law, and/or other actions by competitors other than defendant 12 caused plaintiff to lose revenue and incur other losses. (See Kim Decl. ¶¶ Exs. G-M.) 13 Defendant, however, fails to support its contention that plaintiff, by such arguable 14 admissions, is foreclosed from showing defendant caused all or part of the injuries 15 alleged in the instant action. Although, as defendant points out, plaintiff has not, in 16 support of its motion for summary judgment or in any subsequent filing, offered evidence 17 establishing a loss of money or property attributable to defendant's advertising, the 18 absence of any such evidence in the current record is not, as discussed above, a ground 19 upon which summary judgment may be granted. 20 Accordingly, defendant has failed to show he is entitled to summary judgment on 21 the issue of plaintiff's entitlement to damages under the Lanham Act. 22 Lastly, with respect to defendant's profits, defendant, citing TrafficSchool.com, Inc. 23 v. Edriver Inc., 653 F.3d 820 (9th Cir. 2011), argues plaintiff cannot show entitlement 24 thereto, as "an award of profits with no proof of harm is an uncommon remedy in a false 25 7 Although, as defendant notes, plaintiff has not disclosed an expert report 26 containing an opinion as to irreparable harm, and assuming such omission would foreclose plaintiff from relying on an expert to establish irreparable harm (see Pretrial 27 Preparation Order, filed February 8, 2019, at 1 (setting deadline for expert disclosure)), 1 advertising suit" that does not involve "false comparative advertising." See id. at 831.8 At 2 this stage of the proceedings, however, although the advertising here at issue does not 3 appear to compare the services offered by the respective parties, defendant, for the 4 reasons discussed above, has not shown plaintiff lacks proof of harm. 5 Accordingly, defendant has failed to show he is entitled to summary judgment on 6 the issue of plaintiff's entitlement to defendant's profits under the Lanham Act. 7 B. Second Claim for Relief: § 17200 8 In the Second Claim for Relief, titled "California Unfair Competition in Violation of 9 Cal. Bus. & Prof. Code § 17200 et seq.," plaintiff alleges defendant is engaging in the 10 following business practices: (1) an "unlawful" business practice, specifically, engaging in 11 the unauthorized practice of law, in violation of 37 C.F.R. § 11.14 and California Business 12 & Professions Code § 6125 (see SAC ¶ 73); (2) an "unfair" business practice, specifically, 13 using "deceptive advertising" that causes "consumers" to "believe that [defendant's] 14 services are comparable to those offered by comparably priced attorney led services" 15 (see SAC ¶ 74); and (3) a "fraudulent" business practice, specifically, "fraudulently 16 advertis[ing]" himself as a lawyer, which practice is "likely to deceive reasonable, average 17 customers" (see SAC ¶ 75). 18 1. Reliance 19 Under California law, a plaintiff may bring a § 17200 claim only if it "has lost money 20 or property as a result of the [alleged] unfair competition." See Cal. Bus. & Prof. Code 21 § 17204. 22 Here, defendant argues, each of the practices identified in the SAC is based on 23 the theory that he is misleading consumers, and that a plaintiff who bases a § 17200 24 8 In his moving papers, defendant also argues a finding of willfulness is a 25 prerequisite to an award of profits, and that plaintiff lacks evidence of willfulness. Subsequent to the completion of briefing, however, the Supreme Court held, as 26 defendant thereafter acknowledged (see Statement of Recent Decision, filed April 23, 2020), willfulness is not a prerequisite for an award of profits where, as here, a plaintiff 27 brings a Lanham Act claim under § 1125(a). See Romag Fasteners, Inc. v. Fossil Group, 1 claim on the theory that consumers are being deceived by the defendant's 2 misrepresentations may only bring such claim if it relied to its detriment on those 3 misrepresentations. Noting plaintiff has never asserted it relied on any of the alleged 4 misrepresentations, defendant argues he is entitled to summary judgment on the § 17200 5 claim. 6 As set forth in In re Tobacco II Cases, 46 Cal. 4th 298 (2009), a plaintiff alleging a 7 § 17200 claim "based on a fraud theory involving false advertising and 8 misrepresentations to consumers" can establish the requisite elements only if such 9 plaintiff "prove[s] actual reliance" on the false advertising and misrepresentations. See 10 id. at 325, 326 n.17, 328. Although the plaintiff in In re Tobacco II Cases was a 11 consumer, the California Supreme Court's reasoning was not expressly limited to cases 12 filed by consumers, and the majority of districts courts that have considered whether the 13 holding in In re Tobacco II Cases applies to cases filed by competitors have found it 14 does. See, e.g., Equinox Hotel Management, Inc. v. Equinox Holdings, Inc., 2018 WL 15 659105, at *13-14 (N.D. Cal. February 1, 2018) (citing cases); L.A. Taxi Cooperative, Inc. 16 v. Uber Technologies, Inc., 114 F. Supp. 3d 852, 866-67 (N.D. Cal. 2015) (applying In re 17 Tobacco II Cases to § 17200 false advertising claim brought by competitor; noting, "in 18 general," under California law, "a fraud action cannot be maintained based on a third 19 party's reliance"). The Court finds persuasive the reasoning set forth in the cases 20 reflecting the majority view, and next addresses the effect of such ruling on the claims 21 raised here. 22 First, to the extent plaintiff's § 17200 claim is based on an "unfair" practice, the 23 claim is solely premised on "deceptive advertising" that is allegedly "causing injury to 24 consumers" (see SAC ¶ 74), and, to the extent the claim is based on a "fraudulent" 25 practice, it is solely premised on "false and misleading statements" allegedly made to 26 "customers" (see SAC ¶ 75). Accordingly, in light of In re Tobacco II Cases and the 27 above-referenced federal cases, the Court finds defendant is entitled to summary 1 statements. 2 To the extent plaintiff's § 17200 claim is based on an "unlawful" practice, however, 3 specifically, the unauthorized practice of law, the Court finds In re Tobacco II Cases no 4 bar to plaintiff's pursuing such claim, given that a defendant can engage in the 5 unauthorized practice of law irrespective of whether a consumer is misled as to the 6 defendant's lack of status as an attorney. Consistent with such finding, the California 7 Court of Appeal has held a law firm may base an "unlawful" § 17200 claim on a 8 competitor's alleged unauthorized practice of law. See Law Offices of Matthew Higbee v. 9 Expungement Assistance Services, 214 Cal. App. 4th 544, 547-48 (2013); see also 10 Klingebiel v. Lockheed Aircraft Corp., 494 F.2d 345, 346 n. 2 (9th Cir. 1974) (holding 11 "[d]ecisions of the California Courts of Appeal are to be followed by a federal court where 12 the Supreme Court of California has not spoken on the question, in the absence of 13 convincing evidence that the highest court of the state would decide differently"). 14 Accordingly, to the extent plaintiff's § 17200 claim is based on an alleged 15 "unlawful" practice, the Court turns to the remaining arguments defendant raises in 16 support of summary judgment. 17 2. Evidence of Lost Money or Property 18 Defendant, raising the same arguments he made in connection with plaintiff's 19 claim for damages under the Lanham Act, argues plaintiff cannot show it lost money or 20 property as a result of defendant's alleged practice of law. For the reasons stated above 21 with respect to the Lanham Act claim, the Court finds defendant is not entitled to 22 summary judgment on such ground. 23 3. Preemption 24 Plaintiff alleges defendant engages in the following acts, all of which plaintiff 25 asserts constitute the practice of law: (1) "advis[ing] potential clients on whether they 26 should file a trademark application"; (2) "choos[ing] classifications" (3) "modif[ying] 27 descriptions of goods and services; (4) "advis[ing] on the acceptability of specimens for 1 (6) "respond[ing] to minor office actions." (See SAC ¶ 73.b.) According to plaintiff, such 2 conduct is in violation of 37 C.F.R. § 11.14, under which only an "individual who is an 3 attorney" may "represent others" before the PTO, see 37 C.F.R. § 11.14(a),9 and in 4 violation of California Business & Professions Code § 6125, under which "[n]o person 5 shall practice law in California unless the person is an active licensee of the State Bar," 6 see Cal. Bus. & Prof. Code § 6125. 7 Defendant argues plaintiff's unauthorized practice of law claim is preempted to the 8 extent it is based on an alleged violation of § 6125. 9 "[S]tate licensing requirements which purport to regulate private individuals who 10 appear before a federal agency," such as "the PTO," are "invalid." See Augustine v. 11 Department of Veterans Affairs, 429 F.3d 1334, 1340 (Fed. Cir. 2005). Consequently, 12 when based on state law, a claim that a defendant is engaged in the unauthorized 13 practice of law before the PTO is preempted. See Janson v. LegalZoom, Inc., 802 F. 14 Supp. 2d 1053, 1068-69 (W.D. Mo. 2011) (holding, where plaintiff claimed manner in 15 which defendant assisted clients in preparing trademark applications constituted 16 unauthorized practice of law in violation of Missouri statute, defendant entitled to 17 summary judgment on grounds of preemption; noting federal law, specifically, § 11.14, 18 sets forth "exclusive" rule). 19 Accordingly, to the extent plaintiff's § 17200 claim is based on a violation of 20 § 6125, defendant is entitled to summary judgment. 21 4. Restitution 22 "[P]rivate individuals" bringing a claim under § 17200 are "limited to injunctive relief 23 and restitution." See California v. IntelliGender, LLC, 771 F.3d 1169, 1174 (9th Cir. 24 2014). 25 9 This regulation is subject to two exceptions inapplicable here, specifically, 26 (1) persons who are not attorneys but were "recognized to practice" before the PTO "prior to January 1, 1957" may continue to do so, see 37 C.F.R. § 11.14(b), and (2) certain 27 "foreign attorney[s] or agent[s]" may represent others before the PTO, see 37 C.F.R. 1 Defendant argues plaintiff is not entitled to restitution. Plaintiff, however, is no 2 longer pursuing a claim for restitution. Although the SAC includes a claim for restitution 3 (see SAC, Req. for Relief, ¶ 4), plaintiff, in his opposition, acknowledges he now seeks 4 injunctive relief as the sole remedy for defendant's alleged violation of § 17200 (see Pl.'s 5 Opp. at 6:8-9). 6 5. Conclusion as to Second Claim for Relief 7 Defendant is entitled to summary judgment on plaintiff's § 17200 claim, other than 8 to the extent plaintiff seeks injunctive relief thereunder on the basis of defendant's alleged 9 violation of § 11.14. 10 C. Third Claim for Relief: § 17500 11 In the Third Claim for Relief, titled "California False & Misleading Advertising in 12 Violation of Cal. Bus. & Prof. Code § 17500 et seq.," plaintiff alleges defendant's 13 advertisements are "false, misleading, and untrue" and have "deceived consumers." 14 (See SAC ¶¶ 83, 84.) 15 Under § 17500, it is unlawful for a person to "make or disseminate . . . any 16 statement, concerning . . . [his] services, professional or otherwise, or concerning any 17 circumstance or matter of fact connected with the proposed performance or disposition 18 thereof, which is untrue or misleading, and which is known, or which by the exercise of 19 reasonable care should be known, to be untrue or misleading." See Cal. Bus. & Prof. 20 Code § 17500. Under California law, a plaintiff may bring a § 17500 claim only if it "has 21 lost money or property as a result of a violation of [§ 17500]." See Cal. Bus. & Prof. Code 22 § 17535. 23 Similar to the argument he raised as to the § 17200 claim, defendant argues a 24 plaintiff cannot bring a § 17500 claim in the absence of detrimental reliance. 25 The California Supreme Court, noting § 17500 "simply codif[ies] prohibitions 26 against certain specific types of misrepresentations," has held a plaintiff bringing a claim 27 thereunder is required to "demonstrate actual reliance on the allegedly deceptive or 1 misrepresentation. See Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 326-27 and n.9 2 || (2011) (citing In re Tobacco Cases ||). Although the California Supreme Court 3 || considered this issue in the context of a claim in which the plaintiff was a consumer, see 4 || id. at 319, its reasoning was not expressly limited to cases filed by consumers, and the 5 || majority of district courts that have considered the issue have held such reasoning 6 || likewise applies to cases filed by competitors, a holding with which this Court agrees. 7 || See, e.g., Equinox Hotel Management, Inc., 2018 WL 659105, at *15 (citing cases); A 8 || White & Yellow Cab, Inc. v. Uber Technologies, Inc., 2017 WL 1208384, *7-9 (N.D. Cal. 9 || March 31, 2017) (finding no basis to limit California Supreme Court's reliance 10 || requirement to cases brought by consumers). 11 Accordingly, defendant is entitled to summary judgment on plaintiff's § 17500 12 claim.

14 For the reasons stated above, defendant's motion for summary judgment is hereby 2 15 || GRANTED in part and DENIED in part, as follows: a 16 1. To the extent plaintiff's Second Claim for Relief is based on (a) unfair and g 17 || fraudulent business practices, (b) a violation of § 6125, and (c) a claim for restitution, the S 18 || motion is GRANTED. 19 2. To the extent defendant seeks summary judgment on the Third Claim for 20 || Relief, the motion is GRANTED. 21 3. In all other respects, the motion is DENIED. 23 24 || Dated: August 17, 2020 (oer Cate MAXINE M. CHESNEY 25 United States District Judge 26 27 28