Restoration Hardware, Inc. v. Sichuan Wei Li Tian Xia Network Technology Co., Ltd

• Court: District Court, N.D. California
• Decided: February 3, 2023
• Docket: 3:22-cv-03054
• Status: Unknown

Opinion

1 UNITED STATES DISTRICT COURT 2 NORTHERN DISTRICT OF CALIFORNIA 3 4 RESTORATION HARDWARE, INC., et Case No. 22-cv-03054-JSC al., 5 Plaintiffs, ORDER RE: MOTIONS TO AMEND 6 COMPLAINT, FILE UNDER SEAL, v. AND EXPAND RELIEF 7 SICHUAN WEI LI TIAN XIA NETWORK Re: Dkt. Nos. 59, 60, 61 8 TECHNOLOGY CO., LTD, et al., Defendants. 9 10 11 Plaintiffs (collectively, “RH”) initially brought this suit for copyright infringement in May 12 2022. (Dkt. No. 1.)1 The Court issued a temporary restraining order enjoining Defendants’ use of 13 copyrighted works and trademarks, locking website domain names, and freezing certain financial 14 accounts related to the alleged infringing activities. (Dkt. No. 13.) The Court extended the TRO 15 to cover additional websites. (Dkt. No. 26.) After considering the evidence provided, the Court 16 granted RH’s request to convert the TRO to a preliminary injunction. (Dkt. No. 29.) 17 RH filed a First Amended Complaint (“FAC”) against additional alleged infringers 18 discovered via post-suit investigation. (Dkt. No. 28.) The Court granted a TRO against the new 19 defendants, (Dkt. No. 36), and later converted that TRO to a preliminary injunction, (Dkt. No. 44). 20 RH then provided evidence some defendants defied the Court’s Orders and created new websites 21 to host the infringing photos. (Dkt. No. 48). The Court expanded the injunction to further lock and 22 disable those new domain names. (Dkt. Nos. 53, 56). Despite service via email, Defendants never 23 appeared at the preliminary injunction hearings, nor opposed any requested relief. 24 RH seeks leave to file a Second Amended Complaint (“SAC”) that includes allegations 25 against additional infringers discovered via post-suit investigation. (Dkt. No. 59.) RH also moves 26 to file the SAC under seal and to expand the relief under the initial preliminary injunction. (Dkt. 27 1 Nos. 60, 61.) The Court DENIES leave to amend without prejudice but GRANTS the motions to 2 seal and to expand the relief in the preliminary injunction. 3 I. Motion for Leave to Amend to Join Additional Defendants 4 “In general, a court should liberally allow a party to amend its pleading.” Sonoma Cnty. 5 Ass’n of Retired Emps. v. Sonoma Cnty., 708 F.3d 1109, 1117 (9th Cir. 2013) (citing Fed. R. Civ. 6 P. 15(a)). “Courts may decline to grant leave to amend only if there is strong evidence of ‘undue 7 delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies 8 by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance 9 of the amendment, [or] futility of amendment, etc.’” Id. (quoting Foman v. Davis, 371 U.S. 178, 10 182 (1962)). “[T]he consideration of prejudice to the opposing party carries the greatest weight.” 11 Id. (quoting Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). Here, 12 RH’s delayed amendment is the result of good faith post-suit investigation and amending would 13 not prejudice the current opposing parties because, despite service via email, those defendants 14 have not yet appeared. So, the traditional factors under Rule 15 weigh in favor of granting 15 amendment. However, because RH seeks to join 21 additional defendants in the SAC, this motion 16 also implicates Federal Rule of Civil Procedure 20. 17 A. Federal Rule of Civil Procedure 20 18 Federal Rule of Civil Procedure 20(a)(2) allows joinder of defendants in one action if:

19 (A) any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, 20 occurrence, or series of transactions or occurrences; and

21 (B) any question of law or fact common to all defendants will arise in the action. 22 23 Fed R. Civ. P. 20. “Even once these requirements are met, a district court must examine whether 24 permissive joinder would comport with the principles of fundamental fairness or would result in 25 prejudice to either side.” Coleman v. Quaker Oats Co., 232 F.3d 1271, 1296 (9th Cir. 2000). The 26 rules regarding permissive joinder are “to be construed liberally in order to promote trial 27 convenience and to expedite the final determination of disputes.” League to Save Lake Tahoe v. 1 1. Same Transaction or Occurrence Requirement 2 The first factor—known as the “same transaction or occurrence” requirement—is at issue 3 here. RH’s FAC pled claims against four groups of defendants: (1) the “Rain & Light” 4 defendants; (2) the “Yiosi” defendants; (3) the “Koko Lights” defendants; and (4) Emilya Limited. 5 (Dkt. No. 28 ¶¶ 6-16.) Joinder was proper in the FAC because RH pled a direct relationship 6 between these defendants—Yiosi allegedly supplied the other defendants with the infringing 7 products. (Id. ¶ 48, 53, 60.) Now RH wishes to amend the FAC to include allegations against 21 8 additional infringers in the proposed SAC. But, unlike in the FAC, RH provides no allegations in 9 the proposed SAC that connect the additional infringers to one another or to the FAC defendants. 10 Thus, the Court must consider whether—if granted leave to amend—RH could properly bring one 11 lawsuit against all alleged infringers consistent with Rule 20. 12 The Ninth Circuit has provided limited guidance regarding the “same transaction, 13 occurrence, or series of transactions or occurrences” standard for defendants under Rule 14 20(a)(2)(A). In Visendi v. Bank of America, the court held that the comparable standard in Rule 15 20(a)(1)(A) “requires factual similarity in the allegations supporting Plaintiffs’ claims.” 733 F.3d 16 863, 870 (9th Cir. 2013) (considering joinder of plaintiffs). There, the Ninth Circuit determined 17 joinder was improper where a group of 160 named plaintiffs sued 15 different defendants 18 regarding illicit lending practices. Id. at 866. Because the plaintiffs’ claims encompassed “100 19 distinct loan transactions with many different lenders,” the court found the plaintiffs interactions 20 with defendants “were not uniform” and the “[f]actual disparities of the magnitude alleged” were 21 “too great to support permissive joinder.” Id. at 870. See also Coughlin v. Rogers, 130 F.3d 1348, 22 1351 (9th Cir. 1997) (affirming severance of mis-joined plaintiffs where each plaintiff had 23 different factual bases underlying their claims). 24 Other courts considering joinder of defendants under Rule 20(a)(2)’s “same transaction or 25 occurrence” standard have reached conflicting conclusions. Most courts require some allegation 26 of cooperative or common action to join defendants under Rule 20(a)(2)(A). See, e.g., AF 27 Holdings, LLC v. Does 1-1058, 752 F.3d 990, 998 (D.C. Cir. 2014) (holding that accused 1 time to be properly joined); On The Cheap, LLC v. Does 1-5011, 280 F.R.D. 500, 503 (N.D. Cal. 2 2011) (same, collecting cases). These decisions reason two defendants that separately violate 3 copyright laws are like “two individuals who play at the same blackjack table at different times. 4 They may have won the same amount of money, employed the same strategy, and perhaps even 5 played with the same dealer, but they have still engaged in entirely separate transactions.” AF 6 Holdings, 752 F.3d at 998; see also WiAV Networks, LLC v. 3Com Corp., No. C 10-03448 WHA, 7 2010 WL 3895047, at *2 (N.D. Cal. Oct. 1, 2010) (“[T]here is no conspiracy claim. There is no 8 claim that any defendant induced another to infringe. Each defendant has simply been thrown into 9 a mass pit with others to suit plaintiff’s convenience.”) So, according to this line of cases, “merely 10 alleging a violation of the same patent or copyright is insufficient to permit a plaintiff to pursue 11 claims against multiple defendants in a single suit.” Optimum Power Sols. LLC v. Apple Inc., No. 12 C 11-1509 SI, 2011 WL 4387905, at *2 (N.D. Cal. Sept. 20, 2011) (collecting cases). This 13 commonality requirement recognizes that, absent cooperative behavior, “infringement issues, 14 damages issues, willfulness issues, time frames and accused conduct, and discovery issues would 15 likely vary from company to company.” Id. (citing Wiav Networks, 2010 WL 3895047 at *3). 16 Thus, joinder was unwarranted where each defendant could raise different defenses on such issues. 17 RH urges the Court to follow Bose Corporation v. Partnerships & Unincorporated 18 Associations Identified on Schedule “A”, 334 F.R.D. 511 (N.D. Ill. 2020). That case bears many 19 factual similarities to RH’s lawsuit. There, Bose sued 17 defendants for counterfeiting under the 20 Lanham Act. As in this case, Bose alleged the defendants were in China and were unlikely to 21 appear after an injunction issued. And, as here, Bose failed to allege any link or cooperative act 22 between the defendants other than a similar counterfeiting tactic. Nevertheless, the Bose court 23 concluded that the separate counterfeiting acts constituted a single “occurrence” under Rule 24 20(a)(2). 25 The Bose court’s interpretation of Rule 20 relies on three premises. First, the court 26 reasoned that an “occurrence” is broader than a “transaction,” thus:

27 Rule 20’s inclusion of the term “occurrence” should allow plaintiffs harmful occurrences the internet enables—including mass foreign 1 counterfeiting—were inconceivable when Rule 20 was drafted. But the Rule’s inclusion of the term “occurrence” suggests that joinder is 2 appropriate in cases alleging harm that is not strictly “transactional.” 3 Id. at 516. Second, many counterfeiting defendants—acting simultaneously but separately—form 4 a “swarm” that constitutes a single “occurrence” because it is “the swarm—the fact that all 5 [d]efendants are attacking at once—that is the defining aspect of the harm from which Bose seeks 6 relief.” Id. at 517. And third, the Bose court excused the coordination requirement because:

7 From the plaintiff’s perspective (which is the appropriate perspective at the pleading stage) it is irrelevant whether the swarm is 8 intentionally coordinated or simply a product of market forces enabled by the internet. It is reasonable for a plaintiff who is attacked 9 by a swarm (and remember, Bose has made strong allegations that Defendants are indeed violating Bose's trademarks with impunity) to 10 come to the Court for shelter against that conduct. 11 Id. at 517 (emphasis in original). Thus, the court concluded “it is no longer particularly concerned 12 with joinder of multiple defendants alleged to be counterfeiters in circumstances like those alleged 13 in this case,” but remained open to a motion to sever should any defendant appear and object. Id. 14 at 517-518. 15 The Court is unconvinced. Bose recognizes a practical concern. If defendants in 16 counterfeiting cases are unlikely to appear in court and the matter will likely be determined 17 through the default judgment, it is inefficient for a plaintiff to bring multiple, separate lawsuits. 18 But the reasoning in Bose is without any practical limiting principle. Absent some cooperative or 19 common factual basis, a court cannot differentiate between a “swarm” of defendants and 20 defendants “simply committing the same type of violation in the same way.” AF Holdings, 752 21 F.3d at 998 (quoting Hard Drive Productions, Inc. v. Does 1–30, 2011 WL 4915551, at *3 (E.D. 22 Va. 2011)). And, particularly when preliminary relief is sought, Bose articulates the Court’s 23 concern under Rule 20 precisely backward. It is not only the “plaintiff’s perspective” that matters 24 at the pleading stage. When a plaintiff can seek injunctive relief against a defendant, the 25 defendant should have the right to mount an individualized defense based on any number of 26 factors that could vary for each alleged swarm member. The Court, using Rule 20, must protect 27 that right. WiAV Networks, LLC v. 3Com Corp., No. C 10-03448 WHA, 2010 WL 3895047, at *2 1 suit plaintiff’s convenience.”) Finally, the efficiency assumptions rely on the premise that the 2 defendants will not appear before the court. Such a presumption is inappropriate at this stage. 3 Nor would efficiency be served if the defendants appeared and filed Rule 21 motions to sever. 4 Unlike with the FAC, where RH alleged a connection between Yiosi and each other 5 defendant, RH’s SAC provides no connective tissue between the additional alleged infringers 6 other than similar violations of similar protected works. That is insufficient. In the absence of any 7 cooperative or common action allegations, the factual differences between the various alleged 8 infringers are “too great to support permissive joinder.” Visendi, 733 F.3d at 870. 9 *** 10 Thus, RH’s motion to amend is DENIED without prejudice. RH may move again if it 11 discovers additional facts warranting joinder or provides another valid reason under Rule 15. 12 II. Motion to File Under Seal 13 RH moves to seal its proposed SAC, (Dkt. No. 60-3), which was attached as Exhibit A to 14 RH’s motion for leave to amend the complaint, (Dkt. No. 60). 15 There is a presumption of public access to judicial records and documents. Nixon v. 16 Warner Commc’ns, Inc., 435 U.S. 589, 597 (1978). Courts generally apply a “compelling 17 reasons” standard when considering motions to seal, recognizing that “a strong presumption in 18 favor of access is the starting point.” Kamakana v. City & Cty. Of Honolulu, 447 F.3d 1172, 1178 19 (9th Cir. 2006) (cleaned up). Parties seeking to seal judicial records relating to motions that are 20 “more than tangentially related to the underlying cause of action,” Ctr. for Auto Safety v. Chrysler 21 Grp., 809 F.3d 1092, 1099 (9th Cir. 2016), bear the burden of overcoming the presumption with 22 “compelling reasons supported by specific factual findings that outweigh the general history of 23 access and the public policies favoring disclosure,” Kamakana, 447 F.3d at 1178–79 (cleaned 24 up). By contrast, a “good cause showing” under Federal Rule of Civil Procedure 26(c) “will 25 suffice to keep sealed records attached to non-dispositive motions.” Id. at 1180. 26 A complaint is “more than tangentially related to the underlying cause of action,” Ctr. for 27 Auto Safety, 809 F.3d at 1099, because it forms “the foundation of the lawsuit.” In re Yahoo! Inc. 1 Jan. 3, 2018) (collecting cases). Accordingly, the compelling reasons standard applies. 2 RH meets the compelling reasons standard at this stage. RH intends to file suit against 3 || parties named in the SAC. It requests the SAC remain sealed while RH pursues temporary 4 || injunctive relief to preserve the status quo and freeze financial accounts with allegedly ill-gotten 5 gains. Were the SAC filed publicly, RH declares it will be injured because defendants may 6 || transfer funds and domain names to servers beyond this court’s jurisdiction. The Court accepts 7 || these reasons as compelling at this stage and GRANTS RH’s motion to seal Docket Number 60-3. 8 Ill. Motion to Expand Relief 9 RH also moves to expand the scope of the preliminary injunction entered against the Rain 10 & Light defendants. On October 17, 2022, the Court previously expanded the scope of the 11 preliminary injunction to authorize the registry (Verisign) to disable Defendant Rain & Light’s 12 || websites rainandlight.com and rainandlights.com. RH provides evidence that Rain & Light has 5 13 created a third, nearly identical website, “rainandlighting.com,” which also uses RH’s copyrighted S 14 || photographs and trademarks. (Dkt. No. 61.) Consistent with the Court’s earlier order, (Dkt. No. 3 15 56), the Court GRANTS RH’s request to expand the preliminary injunction to cover this new a 16 || website, “rainandlighting.com.” 3 17 The Court orders the registrar eName Technologies Co. Ltd., and the registry Verisign, 18 || Inc. for the rainandlighting.com domain name to disable the domain name during the pendency of 19 || this case or until further order of this Court. Rain & Light may move to modify this Order. 20 CONCLUSION 21 RH’s motion to amend its complaint is DENIED without prejudice. The motion to file 22 || Docket Number 60-3 under seal is GRANTED. The motion to expand relief, (Dkt. No. 61), is 23 || GRANTED. 24 IT IS SO ORDERED. 25 This Order disposes of Dkt. Nos. 59, 60, 61. 26 Dated: February 3, 2023

JACQUELIN OTT CORL 28 Un¥ed States District Judge