Opinion
No. 2:14-CV-02423-KJM-AC
03-31-2016
BAJA INSURANCE SERVICES, INC., Plaintiff, v. SHANZE ENTERPRISES, INC., Defendant.
ORDER
This trademark infringement action arises from each party's use of the words "Baja" and "Insurance" to advertise and sell auto insurance services to Hispanic consumers in California and Texas. Defendant's motion for judgment on the pleadings is before the court, ECF No. 25, as well as defendant's motion for leave to file an amended answer and counterclaim, ECF No. 37, and plaintiff's motion for leave to amend the first amended complaint, ECF No. 44. The court decided the motions without a hearing. As explained below, the court DENIES defendant's motion for judgment on the pleadings, GRANTS defendant's motion for leave to file an amended answer and counterclaim, and GRANTS plaintiff's motion for leave to amend the first amended complaint. ///// /////
I. JUDICIAL NOTICE
Under Federal Rule of Evidence 201, the court may take judicial notice of adjudicative facts that are not subject to reasonable dispute because they are either "generally known within the trial court's territorial jurisdiction" or "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). The court "must take judicial notice if a party requests it and the court is supplied with the necessary information." Fed. R. Evid. 201(c)(2).
Here, defendant requests judicial notice of the file wrappers for plaintiff's federally registered trademarks from the United States Patent and Trademark Office ("USPTO"), Def.'s Exs. A & B, ECF Nos. 25-3-25-4, and a public record of plaintiff's license to sell insurance in Texas from the Texas Department of Insurance, Def.'s Ex. C, ECF No. 25-5. Defendant seeks to offer the documents to show statements plaintiff made in order to obtain the trademark registrations and incontestable status, as well as the date plaintiff obtained a license to sell insurance in Texas. ECF No. 26 at 2. Defendant's request for judicial notice is unopposed. Because these documents are public records that "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned," Fed. R. Evid. 201(b), the court takes judicial notice of defendant's Exhibits A, B, and C, ECF Nos. 25-3-25-5 ("Def.'s Exs. A-C"). See Autodesk, Inc. v. Dassault Sys. SolidWorks Corp., No. 08-04397, 2008 WL 6742224, at *2 n.1 (N.D. Cal. Dec. 18, 2008) (taking judicial notice of trademark registrations and applications publicly available on USPTO website) (citing Hoganas AB v. Dresser Indus., Inc., 9 F.3d 948, 954 (Fed. Cir. 1993)). The court also takes judicial notice of the registration certificates and maintenance records issued by the USPTO for plaintiff's trademarks, attached as Exhibits 1 and 2 to plaintiff's first amended complaint, ECF Nos. 8-1-8-2 ("Pl.'s Exs. 1-2"). Fed. R. Evid. 201(b).
II. BACKGROUND
Plaintiff Baja Insurance Services, Inc. is headquartered in Sacramento, California, and started selling auto, home, life, and business insurance in California as "Baja Insurance Services, Inc." in 1998. First Am. Compl. ¶¶ 1, 7, ECF No. 8 ("FAC"). Plaintiff applied for federal protection of its first mark, a word and design mark, on June 11, 2007. Pl.'s Ex. 1; Def.'s Ex. A. Plaintiff filed its application for its second mark, a word-only mark, on April 14, 2010. Pl.'s Ex. 2; Def.'s Ex. B. The USPTO granted registration of plaintiff's marks, Registration Numbers 3,568,815 ("the '815 Mark") and 3,919,175 ("the '175 Mark"), in February 2009 and February 2011, respectively. FAC ¶ 9; Pl.'s Exs. 1 & 2; Def.'s Exs. A & B. Defendant Shanze Enterprises, Inc., which is now known as Plano Insurance Group, Inc. ("defendant Plano"), is headquartered in Dallas, Texas and formerly sold auto insurance under the trade name "Baja Auto Insurance." FAC ¶¶ 2, 8; see ECF No. 11; Def.'s Mem. P. & A. Mot. J. Pleadings at 1, ECF No. 25-1 ("Def.'s Mem. P. & A.").
At the time plaintiff obtained its trademark registrations, the parties did not have licenses permitting them to sell insurance outside of their respective home states. On January 29, 2013, plaintiff acquired a license from the Texas Department of Insurance to sell auto insurance in Texas. Def.'s Ex. C; see FAC ¶ 25 (plaintiff filed paperwork for a non-resident license in Texas in late 2012 and early 2013, and opened a virtual office in Texas in June 2013). On June 24, 2014, plaintiff's '815 Mark became incontestable within the meaning of Section 15 of the Lanham Act, 15 U.S.C. § 1065. Def.'s Ex. A; FAC ¶ 9. On October 15, 2014, plaintiff filed this action. Compl., ECF No. 1. On January 27, 2015, plaintiff filed the operative first amended complaint, which asserts claims under the Lanham Act, 15 U.S.C. §§ 1114(1)(a) & 1125(a); California state trademark law, Cal. Bus. & Prof. Code § 14245; California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200, et seq.; and California False Advertising Law, Cal. Bus. & Prof. Code §§ 17500, et seq. See FAC ¶¶ 29-39.
On August 20, 2015, defendant filed a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). Mot., ECF No. 25. On October 9, 2015, plaintiff opposed defendant's motion, or in the alternative, requested leave to amend the first amended complaint. Opp'n, ECF No. 30. Defendant replied on October 23, 2015 and supplemented its reply on November 11, 2015. Reply, ECF No. 31; Supplement, ECF No. 33. Plaintiff responded to defendant's November 11 submission on November 12, 2015. ECF No. 34.
On December 11, 2015, defendant filed a motion for leave to file an amended answer and counterclaim. ECF No. 37. Plaintiff opposed the motion, ECF No. 39, and defendant replied, ECF No. 42. On February 22, 2016, plaintiff filed a motion for leave to amend the first amended complaint to join additional defendants. ECF No. 44. Defendant opposed the motion. ECF No. 45.
III. MOTION FOR JUDGMENT ON THE PLEADINGS
A. Rule 12(c) Legal Standard
Rule 12(c) of the Federal Rules of Civil Procedure provides that "[a]fter the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). A Rule 12(c) motion may raise the defense of failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(h)(2)(B). The same standard of review applies to motions brought under Rule 12(c) or Rule 12(b)(6), and many of the same rules delineated in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), apply to Rule 12(c) motions. See Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 n.4 (9th Cir. 2011) ("Rule 12(c) is 'functionally identical' to Rule 12(b)(6) . . . .").
"Judgment on the pleadings is properly granted when there is no issue of material fact in dispute, and the moving party is entitled to judgment as a matter of law." Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009); Merchs. Home Delivery Serv., Inc. v. Frank B. Hall & Co., 50 F.3d 1486, 1488 (9th Cir. 1995). "A dismissal may be affirmed only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Turner v. Cook, 362 F.3d 1219, 1225 (9th Cir. 2004) (Rule 12(b)(6)) (internal quotation marks and citation omitted).
In resolving a motion for judgment on the pleadings, the court "must accept all factual allegations in the complaint as true and construe them in the light most favorable to the non-moving party." Fleming, 581 F.3d at 925. However, the court is not required to accept as true "a legal conclusion couched as a factual allegation," Papasan v. Allain, 478 U.S. 265, 286 (1986), quoted in Twombly, 550 U.S. at 555, or "allegations that contradict matters properly subject to judicial notice" or material attached to or incorporated by reference into the complaint, Sprewell v. Golden State Warriors, 266 F.3d 979, 988-89 (9th Cir. 2001). A court's consideration of documents attached to a complaint, documents incorporated by reference in the complaint, or matters of judicial notice will not convert a motion for dismissal into a motion for summary judgment. United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003); Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995).
B. Discussion
The Lanham Act allows the holder of a protectable trademark to hold liable any other person who, without consent, "use[s] in commerce any . . . registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive." 15 U.S.C. § 1114(1)(a). Courts analyze a federal trademark claim under a two-prong test. KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 408 F.3d 596, 602 (9th Cir. 2005). First, the trademark holder "must demonstrate that it owns a valid mark, and thus [has] a protectable interest." Id. (citing Tie Tech, Inc. v. Kinedyne Corp., 296 F.3d 778, 783 (9th Cir. 2002)). Second, the holder must show that the alleged infringer's use of the mark "is likely to cause confusion, or to cause mistake, or to deceive." Id. (quoting 15 U.S.C. § 1114(1)(a) & (b); citation omitted). Although trademark disputes are generally viewed as intensely factual in nature, a challenger is entitled to judgment as a matter of law if it "can demonstrate through law, undisputed facts or a combination thereof that the mark is invalid." KP Permanent Make-Up, 408 F.3d at 602, 605 (analyzing validity of trademark on summary judgment) (quoting Tie Tech, 296 F.3d at 783).
1. Whether Plaintiff's Marks Are Void Ab Initio
a) Presumption of Validity
Federal registration endows a trademark with a "strong presumption" of validity and shifts the burden to the defendant "to show by a preponderance of the evidence that the mark is not protectable." Zobmondo Entm't, LLC v. Falls Media, LLC, 602 F.3d 1108, 1113-14 (9th Cir. 2010) (citing 15 U.S.C. §§ 1057(b), 1115(a); citations omitted). After a registered mark has been in continuous use in commerce for five consecutive years, its owner may apply for incontestable status under 15 U.S.C. § 1065. See KP Permanent Make-Up, 408 F.3d at 602-03. Incontestable status is "conclusive evidence of the registrant's exclusive right to use the registered mark," subject to the defenses enumerated in 15 U.S.C. § 1115(b), such as that the status was obtained fraudulently. Pyrodyne Corp. v. Pyrotronics Corp., 847 F.2d 1398, 1400-01 (9th Cir. 1988); see 15 U.S.C. § 1115(b).
Here, the pleadings allege plaintiff registered its marks with the USPTO in 2009 and 2011, and plaintiff's '815 Mark became incontestable within the meaning of 15 U.S.C. § 1065 on June 24, 2014. FAC ¶ 9. The parties have submitted judicially-noticed documentation of the marks' registration and plaintiff's Declaration for Incontestability. Pl.'s Exs. 1 & 2; Def.'s Ex. A (Pl.'s Decl. for Incontestability); Def.'s Ex. B. The federal registration of the marks entitles plaintiff to a strong presumption that its marks are valid and shifts the burden to defendant to show that the marks are not protectable. See KP Permanent Make-Up, 408 F.3d at 604; Zobmondo Entm't, 602 F.3d at 1114. With respect to the '815 Mark, its incontestable status is conclusive evidence of plaintiff's exclusive right to use the mark, unless defendant can prove one of the defenses enumerated in 15 U.S.C. § 1115(b). See Pyrodyne, 847 F.2d at 1400-01.
b) Whether Defendant Has Pierced the Presumption of Validity
Defendant argues the marks were not "used in commerce" when plaintiff filed for registration, as required by 15 U.S.C. § 1051(a), because plaintiff had a license to sell insurance only within the state of California at the time. Def.'s Mem. P. & A. at 8-12. In response, plaintiff submitted declarations stating its insurance policies covered automobiles that traveled interstate, its policies covered accidents that occurred in other states, and it wrote policies for customers that reside in Mexico. Ordonez Decl. ¶¶ 3, 6, ECF No. 30-2; Smith Decl. ¶¶ 3, 6, ECF No. 30-3.
On November 11, 2015, defendant submitted a letter plaintiff wrote in 2008, which defendant claims directly refutes the testimony offered in the Ordonez and Smith declarations. ECF No. 33. The relevant portion of the letter states: "2. We operate in California and do not have any businesses in the states of Mexico nor plan to operate in the states of Mexico." Id. at Ex. A. Plaintiff responds that the letter was intended to clarify that it did not operate any physical storefronts in the states of Mexico. ECF No. 34. The court does not find that the letter undermines the testimony in the Ordonez and Smith declarations.
To obtain federal protection based on existing use of a trademark (15 U.S.C. § 1051(a)), the mark must be "in use in commerce" as of the application filing date. 15 U.S.C. § 1051(a)(3)(C); 37 C.F.R. § 2.34(a)(1)(i). 15 U.S.C. § 1127 states that "[t]he term 'use in commerce' means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark." Id. The statute goes on to provide two separate requirements for a mark to be deemed in "use in commerce" on services: (1) the mark owner must use or display the mark in the sale or advertising of the services to customers, and (2) the mark owner must render the services in commerce. See id. (defining "use in commerce"); see also Rearden LLC v. Rearden Commerce, Inc., 683 F.3d 1190, 1204 (9th Cir. 2012). Although defendant is correct that a mark owner must satisfy both requirements as a result of the use of the conjunctive "and" in § 1127, see Rearden, 683 F.3d at 1204, the court does not agree with defendant's interpretation that § 1127 also requires plaintiff to show that it advertised its services in more than one state. See Reply at 6-8. The Ninth Circuit in Rearden analyzed each requirement distinctly, and did not examine whether the advertising itself targeted customers from multiple states. See Rearden, 683 F.3d at 1204-08. This court's interpretation is consistent with the fact that § 1127 extended the scope of federal trademark jurisdiction to "all commerce which may lawfully be regulated by Congress," 15 U.S.C. § 1127 (defining "commerce"), rather than imposing heightened showings of interstate use for a mark to receive federal protection.
(1) Use or Display of Mark
With respect to the first requirement under Rearden, defendant has not established as a matter of law that plaintiff's marks were not used or displayed in connection with its insurance services as of 2007 and 2010, when plaintiff filed its applications for registration. Pl.'s Exs. 1 & 2; Def.'s Ex. A & B. The first amended complaint alleges that plaintiff has rendered insurance services since 1998 and has used its marks to advertise its services since the company's inception. See FAC ¶¶ 7-16. Exhibit C to plaintiff's first amended complaint includes representative samples of materials showing plaintiff's use of the marks in connection with its services. Pl.'s Ex. 3, ECF No. 8-3.
Defendant has not provided evidence establishing as a matter of law that plaintiff's allegations are untrue. Defendant has not provided any evidence showing that plaintiff did not in fact render insurance services in 2007 and 2010, or that plaintiff registered its marks simply to reserve a future right in the marks. See 15 U.S.C. § 1127 ("The term 'use in commerce' means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark."). Accordingly, the first amended complaint sufficiently pleads that plaintiff used or displayed its marks in connection with its services as of 2007 and 2010.
(2) Rendering of Services "in Commerce"
Defendant's arguments appear more directed toward the second requirement under Rearden, that the services be rendered "in commerce." In arguing that plaintiff must have had a license to sell insurance in Texas to render services "in commerce" under § 1127, defendant construes the term "commerce" too narrowly. Section 1127 defines the word "commerce" to include "all commerce which may lawfully be regulated by Congress." 15 U.S.C. § 1127. It is well established that Congress has broad powers under the Commerce Clause, U.S. Const. art. I, § 8, and may regulate an activity, even though it is wholly intrastate, if it directly affects interstate commerce. Thompson Tank & Mfg. Co. v. Thompson, 693 F.2d 991, 993 (9th Cir. 1982) (collecting cases); Maier Brewing Co. v. Fleischmann Distilling Corp., 390 F.2d 117, 120 (9th Cir. 1968); see also Trademark Manual of Examining Procedure § 901.03 ("[I]f intrastate use directly affects a type of commerce that Congress may regulate, this constitutes use in commerce within the meaning of the Act."). In Larry Harmon Pictures Corp. v. Williams Restaurant Corp., 929 F.2d 662 (Fed. Cir. 1991), for example, the Federal Circuit held that a single-location restaurant rendered services "in commerce" because it served interstate travelers. Id. at 663-66; see also Application of Gastown, Inc., 326 F.2d 780, 782 (C.C.P.A. 1964) (an automotive service station located in one state rendered services "in commerce" because its services were available to customers traveling interstate on federal highways).
As stated above, plaintiff has provided declarations stating its insurance policies covered automobiles that traveled interstate, its policies covered accidents that occurred in other states, and it wrote policies for customers that reside in Mexico. Ordonez Decl. ¶¶ 3, 6, ECF No. 30-2; Smith Decl. ¶¶ 3, 6, ECF No. 30-3. Like the single-location restaurant in Harmon Pictures and the automotive service station in Gastown, these alleged insurance activities directly affect interstate travel and commerce, and thus would constitute services rendered "in commerce" if proven at trial. A court may grant judgment on the pleadings "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Turner, 362 F.3d at 1225 (citation omitted). Because plaintiff could prove facts consistent with its pleadings that establish that it used its marks "in commerce," defendant is not entitled to judgment on the pleadings.
To the extent defendant challenges the adequacy of the evidence proving that plaintiff in fact used its mark in the way it alleges, such a challenge is properly brought through a motion for summary judgment, if brought before trial. While a court may consider judicially noticeable facts in resolving a motion on the pleadings, see Ritchie, 342 F.3d at 907-08, the inquiry under Rule 12(b)(6) or 12(c) tests the adequacy of the pleadings, not the adequacy of the evidence, see Solid 21, Inc. v. Breitling USA, Inc., 512 F. App'x 685, 687 (9th Cir. 2013) (unpublished).
2. Cancellation of '815 Mark Based on Fraudulent Procurement
Defendant similarly argues that because plaintiff's marks were not used "in commerce" until plaintiff obtained a license to sell insurance in Texas in 2013, plaintiff's representations in its Declaration of Incontestability were false, and the '815 Mark should be canceled for fraudulent procurement of incontestability. Def.'s Mem. P. & A. at 12-15. To cancel a trademark for fraud, the party seeking cancellation must show "a false representation regarding a material fact, the registrant's knowledge or belief that the representation is false, the intent to induce reliance upon the misrepresentation and reasonable reliance thereon, and damages proximately resulting from the reliance." Robi v. Five Platters, Inc., 918 F.2d 1439, 1444 (9th Cir. 1990). In its Declaration of Incontestability, which it filed in June 2014, plaintiff represented that its '815 Mark had been "in continuous use in commerce for five consecutive years after the date of registration." Def.'s Ex. A at 12-13. For the reasons discussed above, defendant has not established that this representation was false. Accordingly, defendant has not shown plaintiff's '815 Mark should be canceled at this stage.
3. Statute of Limitations
a) Trademark Claims
Defendant also asserts it is entitled to judgment as a matter of law because plaintiff's claims are time-barred. Def.'s Mem. P. & A. at 15-18. When a federal statute does not include a statute of limitations, courts "generally presume that Congress intended to 'borrow' the limitations period from the most closely analogous action under state law." Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 836 (9th Cir. 2002). The Ninth Circuit has held that Lanham Act claims are subject to California's three-year statute of limitations for actions grounded in fraud, which begins to run upon plaintiff's "actual or constructive knowledge of the wrong." Karl Storz Endoscopy Am., Inc. v. Surgical Techs., Inc., 285 F.3d 848, 857 (9th Cir. 2002); see Cal. Civ. Proc. Code § 338(d) (an action grounded in fraud or mistake "is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake"). Courts ordinarily "leave the question of whether a plaintiff knew or should have become aware of a fraud to the jury." Gen. Bedding Corp. v. Echevarria, 947 F.2d 1395, 1397 (9th Cir. 1991) (citation omitted).
Plaintiff filed this action on October 15, 2014. ECF No. 1. Applying the three-year limitations period, plaintiff's trademark claims are barred if it had actual or constructive knowledge of the infringement before October 15, 2011. Plaintiff alleges that it first had actual knowledge of Baja Insurance's infringement in November 2012. FAC ¶¶ 8, 25. The first amended complaint explains that "[a]s early as 2011, Plaintiff began receiving telephone calls, emails and written correspondence from various Texas residents who were either requesting insurance quotes, asking for customer service, making insurance claims and/or making yearly premium payments." Id. ¶ 21. The number and frequency of calls and correspondence steadily increased over time, and plaintiff initiated an investigation into the misdirected communications. Id. ¶¶ 21-22. Plaintiff eventually realized that these communications were intended for defendant in November 2012. Id. ¶¶ 8, 21-22. Plaintiff did not apply for a non-resident license with the Texas Department of Insurance until late 2012, and did not open an office in Texas until June 2013. Id. ¶ 25. The court finds that the first amended complaint sufficiently pleads that plaintiff first had actual knowledge of the alleged infringement in November 2012, which is within three years of the date plaintiff filed this action.
Defendant argues that plaintiff's claims should be barred under Herrera-Diaz v. U.S. Department of Navy, 845 F.2d 1534 (9th Cir. 1988), because plaintiff would have discovered the infringement prior to October 15, 2011 if it had exercised "reasonable diligence." Def.'s Mem. P. & A. at 16 (quoting Herrera-Diaz, 845 F.2d at 1537). In Herrera-Diaz, the court held that the statute of limitations in a medical malpractice claim began to run when the mother was told that her child suffered from cerebral palsy and that the condition was caused by a lack of oxygen to the brain at or near the time of birth. 845 F.2d at 1537-38. The court held that at that point, the mother had the burden to ascertain "the existence and source of fault" and determine whether or whom to sue. Id. at 1537.
In contrast to the facts in Herrera-Diaz, defendant Plano has not demonstrated that plaintiff was directly notified of the injury or cause of the injury prior to October 15, 2011. The only facts defendant provides to support its argument are that the first amended complaint alleges plaintiff began receiving communications intended for defendant at an unspecified time in 2011, FAC ¶ 21, and that defendant had filed an application with the USPTO for a service mark, which it abandoned in May 2009, id. ¶ 22. These two facts alone do not establish as a matter of law that plaintiff had constructive knowledge of the infringement before October 15, 2011. Construing the facts in the light most favorable to plaintiff, disputes of material fact exist as to whether plaintiff reasonably should have discovered the alleged trademark infringement prior to October 15, 2011. See Gen. Bedding Corp., 947 F.2d at 1397 ("Ordinarily we leave the question of whether a plaintiff knew or should have become aware of a fraud to the jury." (citation omitted)); cf. Fleming, 581 F.3d at 925 ("Judgment on the pleadings is properly granted when there is no issue of material fact in dispute, and the moving party is entitled to judgment as a matter of law.").
Because plaintiff has stated a claim for trademark infringement and defendant has not demonstrated that its trademark claims are time-barred, defendant's motion for judgment on plaintiff's federal and state trademark claims is denied. As a result, defendant's motion for judgment on plaintiff's false advertising claim is also denied, because it rests solely on dismissal of plaintiff's trademark claims. See Def.'s Mem. P. & A. at 18-19.
Defendant's motion does not argue that plaintiff's false advertising claim is time-barred. --------
b) Unfair Competition Claim
California unfair competition claims are subject to a four-year statute of limitations, which begin to run on the date the cause of action accrued. See Aryeh v. Canon Bus. Solutions, Inc., 55 Cal. 4th 1185, 1196-97 (2013); see also Cal. Bus. & Prof. Code § 17208. The California Supreme Court has held, however, that the date of accrual of an unfair competition claim is subject to a number of equitable exceptions and modifications, such as the discovery rule, equitable tolling, fraudulent concealment, the continuing violation doctrine, and the theory of continuous accrual. Aryeh, 55 Cal. 4th at 1192, 1196 (holding common law accrual rules apply to unfair competition claims).
Courts generally apply a burden-shifting framework to evaluate a statute of limitations defense. Defendant bears the initial burden of proving plaintiff's unfair competition claim is barred by section 17208's four-year limitations period. See id. at 1197. Thereafter, the burden shifts to plaintiff to demonstrate its claim survives based on one or more common law exceptions to the basic date of accrual. See id. "That burden may be imposed even at the pleading stage." Id.
Here, the evidence currently before the court does not establish that plaintiff's unfair competition claim is barred by section 17208's four-year limitations period. Defendant acknowledges that in evaluating a motion for judgment on the pleadings, the court may consider only the factual allegations of the first amended complaint and judicially-noticed facts. See Def.'s Mem. P. & A. at 16 n.4. The first amended complaint alleges defendant filed an application with the USPTO for a trademark for the name "Baja Auto Insurance," which it abandoned in May 2009, but the first amended complaint does not allege defendant actually used the challenged marks in commerce at that time. In addition, defendant has not submitted judicially-noticed facts establishing its use of the challenged marks in 2009. The earliest infringement that can be inferred from the allegations of the first amended complaint occurred in 2011, when plaintiff began receiving communications intended for defendant. See FAC ¶¶ 21, 23. As stated above, plaintiff filed this action on October 15, 2014, so 2011 is within the four-year limitations period for unfair competition claims. Because defendant has not met its initial burden of proving plaintiff's unfair competition claim is time-barred, the burden has not shifted to plaintiff to demonstrate its claim survives under an equitable exception. See Aryeh, 55 Cal. 4th at 1197. Accordingly, defendant's motion for judgment on plaintiff's unfair competition claim is denied.
IV. MOTIONS FOR LEAVE TO AMEND
Each party has moved for leave to amend its pleadings. ECF No. 44 (plaintiff); ECF No. 37 (defendant). Federal Rule of Civil Procedure 15(a)(2) provides that "[t]he court should freely give leave [to amend a pleading] when justice so requires," and the Ninth Circuit has "stressed Rule 15's policy of favoring amendments," Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989). "In exercising its discretion [regarding granting or denying leave to amend,] 'a court must be guided by the underlying purpose of Rule 15—to facilitate decision on the merits rather than on the pleadings or technicalities.'" DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987) (quoting United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981)). However, "liberality in granting leave to amend is subject to several limitations . . . . includ[ing] undue prejudice to the opposing party, bad faith by the movant, futility, and undue delay." Cafasso, 637 F.3d at 1058 (internal citations and quotation marks omitted). In addition, a court should look to whether the plaintiff has previously amended the complaint, as "the district court's discretion is especially broad 'where the court has already given a plaintiff one or more opportunities to amend [its] complaint.'" Ascon, 866 F.2d at 1161 (quoting Leighton, 833 F.2d at 186 n.3).
The court addresses each party's motion in turn.
A. Defendant's Motion
Defendant seeks to file an amended answer and counterclaim to add allegations arising from information discovered through discovery. ECF No. 37. Specifically, the proposed counterclaim seeks declaratory judgment of defendant's non-infringement of plaintiff's marks; declaratory judgment of the invalidity, unenforceability, and cancellation of plaintiff's marks; and damages arising from plaintiff's false or fraudulent registration. Id. at Ex. A. Defendant submits the amendment would not cause prejudice to plaintiff, the request is not brought in bad faith, and the amendment would not affect the discovery or other pretrial deadlines. ECF No. 37 at 4-5. Defendant has not previously amended its answer. In plaintiff's opposition to the motion, plaintiff disputes the truth of the allegations contained in the proposed amended pleadings, but does not provide any other reasons for denying the motion to amend. ECF No. 39.
Because leave to amend should be given freely under Rule 15(a), and defendant has shown good cause, the court grants defendant's motion for leave to file an amended answer and counterclaim.
B. Plaintiff's Motion
On February 22, 2016, plaintiff moved for leave to amend its first amended complaint to join Confie Seguros, Inc. ("CSI"), Confie Insurance Group Holdings, Inc. ("CIGH"), and Confie Seguros Texas, Inc. ("CST"), which are defendant's affiliates and/or subsidiaries, as defendants in this action. ECF No. 44. Plaintiff's request is untimely under the court's June 16, 2015 Status (Pretrial Scheduling) Order, which required parties to seek leave to file any amendments by December 11, 2015. ECF No. 20 at 2. Accordingly, in addition to meeting the requirements of Federal Rule of Civil Procedure 15, plaintiff must also show good cause for modifying the court's scheduling order. ECF No. 20 at 9; Fed. R. Civ. P. 16(b)(4).
Plaintiff has provided declarations stating that during the course of discovery, and as a result of plaintiff's investigation, plaintiff has discovered the following:
(a) Baja Auto Insurance is doing business via the website bajaautoinsurance.com; (b) Baja Auto Insurance is a subsidiary of CIGH Services, Inc., which is a subsidiary of CIFH; (c) the rights to "Baja Auto Insurance" were purchased by CIGH and CST; (d) CIGH and CST are related to or affiliated with, among other entities, Confie Seguros, Inc., Confie Seguros Holdings, Co., Confie Seguros Holding II, Co., and Freeway Insurance Services, Inc.; (e) CIGH and CST are the registered owners of the "Baja Auto Insurance" trade style; (f) CIGH's website displays the infringing mark "Baja Auto Insurance;" and (g) Confie Seguros acquired Baja Auto Insurance.ECF No. 44 at 6-7 (citing Ordonez Decl. II ¶¶ 12-13, ECF No. 44-2; Smith Decl. II ¶¶ 12-13, ECF No. 44-3). Plaintiff contends it has diligently investigated the relevant parties, but was unable to decipher defendant's complex business structure until recently. See ECF No. 44 at 7. Specifically, plaintiff sent cease and desist letters to CIGH on December 24, 2015 and January 14, 2016, but received a response from a different entity, CSI. Id. at 5-6. Plaintiff then obtained an online business report that showed CST and CIGH are affiliated with other entities, including CSI, and own the "Baja Auto Insurance" trade style. Id. at 5. Plaintiff asserts it is in the interest of justice and judicial economy to join all related infringing parties in this action. See Atrizadeh Decl. ¶ 4, ECF No. 44-4. Plaintiff has previously amended its complaint once as a matter of course. ECF No. 8.
In opposition to plaintiff's motion, defendant argues plaintiff was not diligent in seeking leave to amend, and joining additional parties would prejudice defendant by disrupting discovery and delaying the case schedule. ECF No. 45 at 6-10. Defendant submits evidence plaintiff anticipated joining the purchaser of defendant's insurance business since at least June 2015, when the court held its initial status conference. See Torrence Decl. ¶ 5, ECF No. 46; ECF No. 18 at 2-3 (stating further investigation was required to ascertain the identity of the correct defendant(s) to add). Defendant also submitted a declaration stating plaintiff's current counsel acknowledged receipt and review of the Trademark and Domain Name Assignment Agreement between defendant, CST, and CIGH by email on September 23, 2015, and the first page of the agreement discloses the parties to the agreement. Torrence Decl. ¶¶ 8-9.
The court finds it would be in the interest of justice and judicial economy to join the additional defendants in this action. In addition, it does not appear that plaintiff's request is brought in bad faith, would cause undue delay, or would cause defendant undue prejudice, especially because the new defendants appear to be defendant's affiliates and/or subsidiaries. Having weighed the various interests, the court grants plaintiff's motion for leave to amend the first amended complaint. However, given defendant's representations, plaintiff is ordered to show cause within fourteen days why it should not be sanctioned in the amount of $250 for its failure to act diligently in seeking leave to amend. In addition, to avoid prejudice to defendant, barring extraordinary circumstances, the court will only consider modifying the case schedule further if so requested by defendant or by joint stipulation.
V. CONCLUSION
For the foregoing reasons, the court makes the following orders:
(1) Defendant's motion for judgment on the pleadings, ECF No. 25, is DENIED;
(2) Defendant's motion for leave to file an amended answer and counterclaim, ECF No. 37, is GRANTED. Defendant is ordered to file its amended answer and counterclaim within fourteen (14) days of the date this order is filed.
(3) Plaintiff's motion for leave to amend the first amended complaint to join additional parties as defendants, ECF No. 44, is GRANTED. Plaintiff is ordered to file its second amended complaint within fourteen (14) days of the date this order is filed.
(4) Plaintiff is ORDERED TO SHOW CAUSE within fourteen (14) days why it should not be sanctioned in the amount of $250 for its failure to act diligently in seeking leave to amend;
(5) To avoid prejudice to defendant, unless extraordinary circumstances are shown, the court will only consider modifying the case schedule further if so requested by defendant or by joint stipulation.
IT IS SO ORDERED. DATED: March 31, 2016.
/s/_________
UNITED STATES DISTRICT JUDGE