Varsity News Network, Inc. v. Carty Web Strategies, Inc.

NOTICE OF MOTION AND MOTION to Dismiss Counterclaim

C.D. Cal.June 30, 2017

BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:17-cv-02574-PSG-E Levi W. Heath (SBN 220854) levi.heath@btlaw.com Joseph M. Wahl (SBN 281920) joseph.wahl@btlaw.com BARNES & THORNBURG LLP 2029 Century Park East, Suite 300 Los Angeles, California 90067 Telephone: (310) 284-3880 Facsimile: (310) 284-3894 Attorneys for Plaintiff and Counter-Defendant VARSITY NEWS NETWORK, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION VARSITY NEWS NETWORK, INC., a Delaware corporation, Plaintiff, v. CARTY WEB STRATEGIES, INC., a California corporation, Defendant. Case No. 2:17-cv-02574-PSG-E PLAINTIFF AND COUNTER- DEFENDANT VARSITY NEWS NETWORK, INC.’S NOTICE OF MOTION AND MOTION TO DISMISS COUNTERCLAIM; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF Date: August 28, 2017 Time: 1:30 p.m. Crtrm.: 6A Judge: Hon. Philip S. Gutierrez CARTY WEB STRATEGIES, INC., a California corporation, Counter-Claimant, v. VARSITY NEWS NETWORK, INC., a Delaware corporation; and ROES 1 through 20, inclusive, Counter-Defendant. Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 1 of 30 Page ID #:107 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2:17-cv-02574-PSG-E PLEASE TAKE NOTICE that on August 28, 2017 at 1:30 p.m., or as soon thereafter as may be heard in Courtroom 6A of the above-titled court, located at First Street Courthouse. 350 West 1st Street, 6th Floor, Los Angeles, California 90012-4565, Plaintiff and Counter-Defendant Varsity News Network, Inc. (“VNN” or “Plaintiff”) will and hereby does move this Court, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for an order dismissing the identified claims in defendant and counter-claimant Carty Web Strategies, Inc.’s (“Counter- claimant”) Counterclaim, for the following reasons:  Counter-claimant fails to plead factual allegations that provide adequate notice of Plaintiff’s alleged wrongful conduct as required by Fed. R. Civ. P. 8(a);  Counter-claimant fails to plead factual allegations that VNN unfairly frustrated its rights to benefits of the contract;  Counter-claimant fails to plead fraud allegations with the particularity required by Fed. R. Civ. P. 9(b);  Counter-claimant asserts a cause of action for negligent false promise, which does not exist;  Counter-claimant fails to establish a likelihood of confusion when pleading its Lanham Act claims;  Counter-claimant fails to allege that their trademark is famous;  Counter-claimant fails to allege that their trademark is registered;  Counter-claimant fails to plead that Plaintiff took its products and sold them as Plaintiff’s own;  Counter-claimant fails to identify specific advertisements as part of its false advertising claim;  Counter-claimant fails to plead a predicate unlawful action for its Bus. & Prof. Code Section17200 claim; and  Counter-claimant fails to plead a specific relationship Plaintiff is Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 2 of 30 Page ID #:108 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 2 - 2:17-cv-02574-PSG-E alleged to have interfered with. This motion is based on this Notice of Motion and Motion, the accompanying Memorandum of Points and Authorities, the pleadings and records on file herein, and on such other and further argument and evidence as may be presented at the time of the hearing on this matter. This Motion is made following the conference of counsel pursuant to L.R. 7- 3 which took place telephonically on June 22, 2017. Dated: June 30, 2017 BARNES & THORNBURG LLP Levi W. Heath Joseph M. Wahl By:/s/Joseph M. Wahl Levi W. Heath Joseph M. Wahl Attorneys for Plaintiff and Counter- Defendant VARSITY NEWS NETWORK, INC. Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 3 of 30 Page ID #:109 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i 2:17-cv-02574-PSG-E TABLE OF CONTENTS Page(s) I. INTRODUCTION ..............................................................................................1 II. ARGUMENT......................................................................................................2 A. STANDARD OF REVIEW ...................................................................2 B. CWS FAILS TO STATE A CLAIM FOR BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING..2 C. CWS FAILS TO STATE A CLAIM FOR INTENTIONAL MISREPRESENTATION......................................................................4 D. CWS’S CLAIM FOR NEGLIGENT MISPRESENTATION FAILS AS A MATTER OF LAW.....................................................................6 E. CWS FAILS TO STATE A CLAIM FOR FALSE DESIGNATION OF ORIGIN/FEDERAL UNFAIR COMPETITION UNDER THE LANHAM ACT .....................................................................................7 F. CWS FAILS TO STATE A CLAIM FOR TRADEMARK DILUTION UNDER THE LANHAM ACT AND CALIFORNIA BUSINESS & PROFESSIONS CODE SECTION 14200 ET SEQ ............................10 G. CWS’S CLAIM FOR STATE TRADEMARK INFRINGEMENT FAILS AS A MATTER OF LAW.......................................................12 H. CWS’S FAILS TO STATE A CLAIM FOR PALMING OFF ...........13 I. CWS FAILS TO STATE A CLAIM FOR FALSE ADVERTISING UNDER BUS. & PROF. CODE SECTION 17500 ET SEQ...............14 J. CWS FAILS TO STATE A CLAIM FOR UNFAIR COMPETITION UNDER BUS. & PROF. CODE SECTION 17200.............................15 1. CWS Fails To Plead Unlawful Business Practices.....................16 2. CWS Fails To Plead Unfair Business Practices .........................17 K. CWS FAILS TO STATE A CLAIM FOR INTENTIONAL OR NEGLIGENT INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE ..............................................................19 III. CONCLUSION.................................................................................................22 Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 4 of 30 Page ID #:110 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - ii - 2:17-cv-02574-PSG-E TABLE OF AUTHORITIES Page(s) Federal Cases Akopian v. JPMorgan Chase Bank, N.A., No. CV-14-05760, 2014 WL 12591623 (C.D. Cal. Sept. 24, 2014).................3, 4 AllChem Performance Products, Inc. v. Oreq Corporation, No. EDCV-13-00123, 2013 WL 12131737 (C.D. Cal. Nov. 5, 2013) ................................................................................................................9, 10 Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937 (2009) ..............................................................2, 12 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007) ..............................................................2, 12 Blue Dolphin Charters, Ltd. v. Knight & Carver Yachtcenter, Inc., No. 11-CV-565, 2011 WL 5360074 (S.D. Cal. Nov. 3, 2011) ...........................20 Carter v. Bank of America, N.A., No. CV-12-06424, 2012 WL 12887542 (C.D. Cal. Dec. 12, 2012) .......15, 16, 18 Celebrity Chefs Tour, LLC v. Macy’s, Inc., 16 F. Supp. 3d 1159, 1167 (S.D. Cal. 2014) .................................................10, 11 Damabeh v. 7-Eleven, Inc., No. 5:12-CV-1739, 2013 WL 1915867 (N.D. Cal. May 8, 2013)..........19, 20, 21 Dow Jones & Company, Inc. v. International Securities Exchange, Inc., 451 F.3d 295 (2nd Cir. 2006) ..........................................................................9, 10 Dream Marriage Group Inc. v. Anastasia Intern., Inc., No. CV-10-5034, 2010 WL 4346111 (C.D. Cal. Oct. 27, 2010)........................13 GNI Waterman LLC v. A/M Valve Co. LLC, No. CV-F-07-0863, 2007 WL 2669503 (E.D. Cal. Sept. 7, 2007) .....................13 Goldline, LLC v. Regal Assets, LLC, No. CV-14-03680, 2015 WL 1809301 (C.D. Cal. April 21, 2015) ....................12 Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 5 of 30 Page ID #:111 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - iii - 2:17-cv-02574-PSG-E Joe Hand Promotions, Inc. v. Alvarado, No. 1:10-cv-00907, 2011 WL 1544501 (E.D. Cal. April 21, 2011) .............16, 17 Johnson & Johnson v. The American Nat. Red Cross, 552 F. Supp. 2d 434 (S.D.N.Y 2008).................................................................. 11 Lingad v. Indymac Federal Bank, 682 F. Supp. 2d 1142 (E.D. Cal. 2010)................................................................. 3 Luv N’ Care, Ltd. v. Regent Baby Products Corp., 841 F. Supp. 2d 753 (S.D.N.Y. 2012)...........................................................11, 12 Moss v. Infinity Ins. Co., 197 F.Supp.3d 1191, 1199 (N.D. Cal. 2016) ......................................................14 Moss v. U.S. Secret Service, 572 F.3d 962 (9th Cir. 2009).....................................................................2, 14, 15 New West Corp. v. NYM Co. of Cal., Inc., 595 F.2d 1194 (9th Cir. 1979)............................................................................... 9 Panavision Intern., L.P. v. Toeppen, 141 F.3d 1316 (9th Cir. 1998).............................................................................10 Richardson v. Reliance Nat. Indem. Co., No. C-99-2952, 2000 WL 284211 (N.D. Cal. March 9, 2000).............................6 Smith v. Allstate Ins. Co., 160 F.Supp.2d 1150 (S.D. Cal. 2001) ...........................................................4, 5, 6 In re Sony Grand Wega KDF-E A10/A20 Series Rear Projection HDTV Television Litigation, 758 F.Supp.2d 1077 (S.D. Cal. 2010) ................................................................. 15 Summit Technology, Inc. v. High-Line Medical Instruments, Co., 933 F. Supp. 918 (C.D. Cal. 1996)........................................................................ 8 Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137 (9th Cir. 2008).............................................................................14 Tasaranta v. Homecomings Financial, No. 09-CV-01722, 2009 WL 3088335 (S.D. Cal. Sept. 21, 2009).......................3 Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 6 of 30 Page ID #:112 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - iv - 2:17-cv-02574-PSG-E Travelers Cas. And Sur. Co. of America v. R.J. Lanthier Co., No. 12-CV-2962, 2014 WL 4364847 (S.D. Cal. Sept. 2, 2014) ...........................4 UMG Recordings, Inc. v. Global Eagle Entertainment, Inc., 117 F.Supp.3d 1092, 1117-1118 (C.D. Cal. 2015) .............................................20 Variant Displays, Inc. v. Absolute Exhibits, Inc., No. SACV-15-10685, 2016 WL 7486281 (C.D. Cal. Feb. 12, 2016) ................14 Wang & Wang LLP v. Banco Do Brasil, S.A., No. Civ.-S-06-00761, 2007 WL 915232 (E.D. Cal. Mar. 26, 2007) ..................17 Watkinson v. MortgageIT, Inc., No. 10-CV-327, 2010 WL 2196083 (S.D. Cal. June 1, 2010)............................18 State Cases Careau & Co. v. Security Pacific Business Credit, Inc., 222 Cal. App. 3d 1371 (1990)............................................................................... 3 Engalla v. Permanente Medical Group, Inc., 15 Cal. 4th 951 (1997)...........................................................................................5 Khoury v. Maly’s of California, Inc., 14 Cal. App. 4th 612 (1993)................................................................................17 Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134 (2003)...........................................................................19, 21, 22 Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Ass’n, 55 Cal. 4th 1169 (2013).........................................................................................6 Stop Loss Ins. Brokers, Inc. v. Brown & Toland Medical Group, 143 Cal. App. 4th 1036 (2006).............................................................................. 5 Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal. App. 4th 153 (1991).................................................................................... 7 Federal Statutes 15 U.S.C. § 1125(a) ..............................................................................................8, 10 15 U.S.C. § 1125(a)(1)(A)’… .................................................................................... 9 Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 7 of 30 Page ID #:113 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - v - 2:17-cv-02574-PSG-E 15 U.S.C. § 1125(c)(2)(A)........................................................................................10 State Statutes California Business & Professions Code § 14245(a) ...............................................13 California Business & Professions Code § 14245(a)(1) ..........................................12 California Business & Professions Code § 17200........................................15, 17, 18 California Business and Professions Code § 17500.................................................14 California Civil Code, § 1710, subd. (2) .................................................................... 7 Rules Federal Rule of Civil Procedure 8 ............................................................................15 Federal Rule of Civil Procedure 8(a)..............................................................2, 14, 17 Federal Rule of Civil Procedure 9(b) ...........................................................4, 5, 6, 15 Federal Rule of Civil Procedure 12(b) (6).........................................................passim Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 8 of 30 Page ID #:114 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2:17-cv-02574-PSG-E MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION Plaintiff and Counter-Defendant Varsity News Network, Inc. (“VNN”) provides products and services to high school athletic programs that allow for high school sports schedules, results, photographs, data, and statistics to be published and updated online. Defendant and Counter-Claimant Carty Web Strategies, Inc. (“CWS”) is a software and web design company that provides software used by high school athletic associations to manage their sports scheduling, registration, eligibility, and playoffs. The present dispute between VNN and CWS arises out of an agreement entered into between the parties on or about August 15, 2015 (“Partnership Agreement”), whereby VNN agreed to facilitate CWS’s reporting services and provide sales services for CWS and CWS agreed to allow VNN to integrate CWS’s products and access CWS’s user and sports related data. VNN initiated this lawsuit when CWS failed and refused to honor its contractual obligations, including by refusing to pay VNN for amounts due and owing under the Partnership Agreement. In what can only be characterized as an “everything but the kitchen sink” approach to litigation, CWS responded by asserting fourteen counter-claims ranging from intentional misrepresentation to trademark dilution. In every respect, however, CWS’s Counterclaim fails to detail the factual foundation upon which counterclaims two through thirteen rely upon to state claims for relief. CWS’s boilerplate and formulaic recitation of the elements devoid of any factual enhancement provide a masterclass of how not to draft a complaint. Counterclaims two through thirteen are so overwhelmingly conclusory that they could literally be copied and pasted into any complaint, requiring only a simple change of the party being sued. Such striking deficiencies warrant the dismissal of counterclaims two through thirteen. Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 9 of 30 Page ID #:115 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 2 - 2:17-cv-02574-PSG-E II. ARGUMENT A. STANDARD OF REVIEW To survive a motion to dismiss, a complaint must allege facts in support of each element of a claim; “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949 (2009). While a court will accept well-pleaded allegations as true for the purposes of a Federal Rule of Civil Procedure 12(b) (6) motion, it is “not bound to accept as true” speculation or “legal conclusion[s] couched as factual allegation[s].” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1965 (2007). The pleading standard of Federal Rule of Civil Procedure 8(a) “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949. Therefore, courts must dismiss complaints that offer only “labels and conclusions,” “a formulaic recitation of the elements of a cause of action,” or “naked assertion[s] devoid of further factual enhancement.” Id. at 1949 (quoting Twombly, 550 U.S. at 555, 557, 127 S.Ct. 1955) (internal quotation marks omitted). Accordingly, “for a complaint to survive a motion to dismiss, the non- conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (internal quotation marks and citation omitted). B. CWS FAILS TO STATE A CLAIM FOR BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING “To bring a claim for breach of the implied covenant of good faith and fair dealing, a Plaintiff must show that: (1) the parties entered into a contract; (2) the plaintiff fulfilled her contractual obligations; (3) any conditions precedent to the Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 10 of 30 Page ID #:116 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 3 - 2:17-cv-02574-PSG-E defendant's performance occurred; (4) the defendant unfairly interfered with the plaintiff's rights to receive the benefits of the contract; and (5) the plaintiff was harmed by the defendant's conduct.” Akopian v. JPMorgan Chase Bank, N.A., No. CV-14-05760, 2014 WL 12591623 at *3 (C.D. Cal. Sept. 24, 2014) “In essence, the covenant [of good faith and fair dealing] is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party's rights to the benefits of the contract.” Lingad v. Indymac Federal Bank, 682 F. Supp. 2d 1142, 1154 (E.D. Cal. 2010). “If the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” Careau & Co. v. Security Pacific Business Credit, Inc., 222 Cal. App. 3d 1371, 1395 (1990). The first counterclaim that should be dismissed is the second claim for breach of the implied covenant of good faith and fair dealing. This claim is so inartfully pleaded that it appears to have been merely cut and pasted from CWS’s contract claim because instead of alleging the element of “unfair interference with the right to receive the benefit of the contract,” CWS simply re-alleges various breaches of the Partnership Agreement. Counterclaim ¶ 49. In addition to only alleging breaches of contract, no other factual allegations are offered to show that VNN unfairly interfered or frustrated CWS’s right to receive benefits under the Partnership Agreement. Furthermore, conclusory allegations (even more factually robust than those plead here) for implied covenant of good faith and fair dealing claims have been held by several courts to be insufficient to survive the liberal standard of Fed. R. Civ. P. 12(b)(6). See e.g. Tasaranta v. Homecomings Financial, No. 09-CV-01722, 2009 WL 3088335 at *6 (S.D. Cal. Sept. 21, 2009) (court concluding plaintiffs did not allege how defendant unfairly interfered with Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 11 of 30 Page ID #:117 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 4 - 2:17-cv-02574-PSG-E plaintiffs’ rights under any contract, other than conclusory allegations); Travelers Cas. And Sur. Co. of America v. R.J. Lanthier Co., No. 12-CV-2962, 2014 WL 4364847 at *4 (S.D. Cal. Sept. 2, 2014) (allegations that defendant failed to “fully investigate claims made by subcontractors prior to paying out such claims,” or that defendant allegedly paid claims “that should not have been paid” were conclusory and insufficient to state a claim for breach of the implied covenant of good faith and fair dealing); Akopian at *4 (dismissing claim because “Plaintiff fails to allege facts showing that Defendant unfairly interfered with Plaintiff's right to receive benefits under any operative loan agreement”). CWS has failed to allege all elements of its claim for breach of the implied covenant and failed to allege facts sufficient to state such a claim. As a result, this claim should be dismissed. C. CWS FAILS TO STATE A CLAIM FOR INTENTIONAL MISREPRESENTATION The next counterclaim that should be dismissed is the third claim for intentional misrepresentation. CWS alleges that “VNN made a series of false promises to CWS over the course of the Parties’ business relationship, and in connection with the Partnership Agreement, on which CWS reasonably relied” and that “VNN knew such promises were false when made, but made such promises with the intention of inducing CWS to enter into the Partnership Agreement.” Counterclaim ¶¶ 52-53. Although plead as “intentional misrepresentation,” what CWS is actually alleging is promissory fraud. “In diversity cases where the cause of action is fraud, the substantive elements of fraud are determined by state law… however, must be pleaded in accordance with Fed. R. Civ. P. 9(b).” Smith v. Allstate Ins. Co., 160 F.Supp.2d 1150, 1152 (S.D. Cal. 2001). In California, the elements of fraud that will give rise to a tort action for Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 12 of 30 Page ID #:118 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 5 - 2:17-cv-02574-PSG-E deceit are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e. to induce reliance; (d) justifiable reliance; and (e) resulting damage.” Engalla v. Permanente Medical Group, Inc., 15 Cal. 4th 951, 974 (1997). Under Rule 9(b), all claims for fraud must be pleaded with particularity. Smith at 1152. “The Ninth Circuit has identified two aspects of this particularity requirement. [citation] First, the plaintiff's allegations must identify the time, place and content of the alleged misrepresentation so that the defendant can identify the statement. [citation] Second, the plaintiff must plead facts explaining why the statement was false when it was made.” Id. “As a consequence of this second requirement, the plaintiff is precluded from simply pointing to a defendant's statement, noting that the content of the statement conflicts with the current state of affairs, and then concluding that the statement in question was false when made.” Id. at 1153. CWS’s fraud claim essentially lists various VNN contractual obligations (see §§ 5.5, 8.1(ii), 9.1. 10.2(ii), and 4.4 of the Partnership Agreement) and claims those “promises” were false at the time they were made. Counterclaim ¶¶ 52-53. It is well-settled in California that “[a] person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations.” Stop Loss Ins. Brokers, Inc. v. Brown & Toland Medical Group, 143 Cal. App. 4th 1036, 1041 (2006). Similar allegations were set forth in Smith, which were dismissed for failing to satisfy the heightened pleading requirements of Rule 9(b). Smith at 1154. That court stated plaintiff “assumes that the alleged breach of contract can be used as evidence that [defendant] never intended to honor the contract, thereby committing fraud. Such an assumption is unwarranted because it contradicts the heightened pleading requirements of Rule 9(b) and would allow ‘every breach of contract [to] support a claim of fraud so long as the plaintiff adds to his complaint a general allegation that the defendant never intended to keep her promise.’” Id. at Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 13 of 30 Page ID #:119 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 6 - 2:17-cv-02574-PSG-E 1153-1154. CWS’s Counterclaim, like the plaintiff’s complaint in Smith, “contains no facts (besides the alleged breaches of contract) suggesting [VNN’s] representations were false at the time they were made,” therefore, must fail. Id. at 1154; see Richardson v. Reliance Nat. Indem. Co., No. C-99-2952, 2000 WL 284211 at *4-5 (N.D. Cal. March 9, 2000) (court dismissing promissory fraud claim because “merely pointing to statements and alleging their falsity does not satisfy Rule 9(b)”). [T]he intent element of promissory fraud entails more than proof of an unkept promise or mere failure of performance.” Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Ass’n, 55 Cal. 4th 1169, 1183 (2013). There are no factual allegations as to what statements were made (or when/where/etc.), no factual allegations regarding why the disputed statements were untrue at the time they were made, and no factual allegations regarding why CWS was justified in relying on those statements. CWS’s transparent attempt to turn a breach of contract claim into a tort has failed to allege any facts that would satisfy Rule 9(b)’s particularity requirement, and for this reason CWS’s “intentional misrepresentation” claim should be dismissed. D. CWS’S CLAIM FOR NEGLIGENT MISPRESENTATION FAILS AS A MATTER OF LAW Next, the Court should dismiss the forth counterclaim for negligent misrepresentation. CWS alleges that “VNN made a series of false promises to CWS over the course of the Parties’ business relationship, and in connection with the Partnership Agreement…[a]t the time such promises were made, VNN had no reasonable ground for believing them to be true, amounting to the level of gross negligence.” Counterclaim ¶¶ 57-58. Paradoxically, CWS then alleges “CWS was and is economically harmed by VNN’s blatant and intentional breaches” and Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 14 of 30 Page ID #:120 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 7 - 2:17-cv-02574-PSG-E “VNN’s conduct…was done with a conscious disregard of the rights of CWS.” Counterclaim ¶¶ 60-61. Though, VNN assumes pleading intent for a negligence claim is just a byproduct of CWS’s sloppy “cut and paste” pleading style. Again, CWS merely lists various VNN contractual obligations (see §§ 5.5, 8.1(ii), 9.1. 10.2(ii), and 4.4 of the Partnership Agreement) and claims VNN had no reasonable ground for believing them to be true when those “promises” were made. Counterclaim ¶¶ 57-58. Regardless, it doesn’t matter that CWS failed to allege any facts to support this cause of action because as a matter of law no such cause of action exists in California. “To maintain an action for deceit based on a false promise, one must specifically allege and prove, among other things, that the promisor did not intend to perform at the time he or she made the promise and that it was intended to deceive or induce the promisee to do or not do a particular thing. [citations] Given this requirement, an action based on a false promise is simply a type of intentional misrepresentation, i.e., actual fraud. The specific intent requirement also precludes pleading a false promise claim as a negligent misrepresentation, i.e., ‘The assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true.’ (Civ. Code, § 1710, subd. (2).) Simply put, making a promise with an honest but unreasonable intent to perform is wholly different from making one with no intent to perform and, therefore, does not constitute a false promise.” Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal. App. 4th 153, 159 (1991). Therefore, CWS’s negligent promissory fraud claim should be dismissed with prejudice. E. CWS FAILS TO STATE A CLAIM FOR FALSE DESIGNATION OF ORIGIN/FEDERAL UNFAIR COMPETITION UNDER THE LANHAM ACT The Court should also dismiss CWS’ fifth counterclaim for false designation Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 15 of 30 Page ID #:121 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 8 - 2:17-cv-02574-PSG-E of original/federal unfair competition under the Lanham Act. As the Counterclaim alleges no actual facts regarding when VNN allegedly used the CWS Mark without authorization, VNN can only assume such use occurred after CWS purportedly terminated the Partnership Agreement per Section 6.2 on November 9, 2016. Counterclaim ¶ 37. CWS’s claim fails because the Partnership Agreement explicitly grants VNN the right to use all of CWS’s intellectual property, including the CWS Mark. Section 3.4 of the Partnership Agreement states that “CWS authorizes VNN to communicate with CWS’s schools directly on an individual basis in effort to sell both VNN and CWS products.” Also, Section 7.1 of the Partnership Agreement states that “[i]n the event of termination of this Agreement under section 6.2 VNN is automatically granted a non-exclusive, one year… worldwide license and related rights to reproduce, display…distribute, make, sell, sublicense and otherwise use CWS’s data (including all intellectual property and proprietary rights therein, such as copyrights, trade secrets and patents…).” Although “trademarks” are not explicitly listed, it is indisputable that “trademarks” fall under the umbrella of “intellectual property.” Also, based on the use of the words “such as” proceeding various forms of intellectual property, it is clear that the contract was merely listing forms of intellectual property, rather than limiting the types of intellectual property that the contract applied to. Even if the Partnership Agreement was not dispositive regarding the failure of this claim (it is), CWS’s claim under Section 15 U.S.C. § 1125(a) still fails. In order to succeed on a false designation of origin claim under section1125(a), a plaintiff must prove: (1) defendant uses a designation or false designation of origin; (2) the use was in interstate commerce; (3) the use was in connection with goods or services; (4) the designation or false designation is likely to cause confusion; (5) plaintiff has been or is likely to be damaged by these acts. Summit Technology, Inc. v. High-Line Medical Instruments, Co., 933 F. Supp. 918, 928 (C.D. Cal. 1996). Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 16 of 30 Page ID #:122 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 9 - 2:17-cv-02574-PSG-E CWS fails to plead any facts to satisfy these elements. The case of AllChem Performance Products, Inc. v. Oreq Corporation, No. EDCV-13-00123, 2013 WL 12131737 (C.D. Cal. Nov. 5, 2013) is instructive because the plaintiff there similarly alleges conclusory allegations that fail to state a claim. In AllChem, the plaintiff “states only that Defendants' allegedly ‘false and misleading labels are likely to cause confusion, mistake, or deception as to the origin, sponsorship, or approval of Defendants' trichlor in violation of 15 U.S.C. § 1125(a)(1)(A)’… [and the] FAC states that the labels are likely to cause confusion, but the FAC does not make any specific allegation as to the nature of the confusion-even that the confusion relates in some way with the EPA.” Id. at *5. That court concluded that plaintiff had not fulfilled Twombly’s requirement that a plaintiff provide the grounds of its entitlement to relief beyond “labels and conclusions, and a formulaic recitation of the elements” of false designation of origin. Id.; See also Dow Jones & Company, Inc. v. International Securities Exchange, Inc., 451 F.3d 295, 307 (2nd Cir. 2006) (“The mere assertion that [defendant’s] intended use of the Dow Jones marks would constitute trademark infringement and dilution1, without any factual allegations concerning the nature of the threatened use, does not give the defendants fair notice of the claims against them… As to the trademark claims, Dow Jones's complaint, ‘consists of conclusory allegations unsupported by factual assertions’ and therefore it ‘fails even the liberal standard of Rule 12(b)(6).’”). As is the theme with CWS’s counterclaim, CWS formulaically pleads the elements devoid of factual enhancement. CWS alleges “VNN’s unauthorized use of the CWS Mark in connection with their purported offering for sale and selling of exact or substantially similar products and services constitutes unfair competition and false designation of origin… because VNN’s use suggests a false designation 1 “[I]nfringement, unfair competition or false designation of origin, the test is identical.” New West Corp. v. NYM Co. of Cal., Inc., 595 F.2d 1194, 1201 (9th Cir. 1979). Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 17 of 30 Page ID #:123 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 10 - 2:17-cv-02574-PSG-E of origin of the products and services they are purporting to offer.” Counterclaim ¶ 63. And “public, who is confused by VNN’s unauthorized use of the CWS Mark.” Counterclaim ¶ 64. Nowhere does CWS allege the CWS Mark was used in interstate commerce, but more importantly CWS makes no allegations as to the specific nature of the asserted confusion. It is unclear what VNN actually did to allegedly confuse the public, or in what way the public is actually confused. Such deficiencies have been found as fatal. AllChem at *5. Such conclusory and fact deficient claims are exactly the type that courts have held fail the liberal standard of Rule 12(b)(6). Id.; Dow Jones at 307. CWS has failed to allege sufficient facts to support a claim under Section 1125(a), therefore CWS’s claim should be dismissed. F. CWS FAILS TO STATE A CLAIM FOR TRADEMARK DILUTION UNDER THE LANHAM ACT AND CALIFORNIA BUSINESS & PROFESSIONS CODE SECTION 14200 ET SEQ As with the false designation of origin/unfair competition claim, the Court should also dismiss the sixth and eighth counterclaims for trademark dilution. “To plead a claim for federal trademark dilution, a plaintiff must show that it owns a famous and distinctive trademark, that the defendant began using the mark in commerce after the mark became famous, and that the defendant's use of the mark is likely to cause dilution by blurring or tarnishment.” 2 Celebrity Chefs Tour, LLC v. Macy’s, Inc., 16 F. Supp. 3d 1159, 1167 (S.D. Cal. 2014). “[A] mark is famous if it is widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark's owner.” 15 U.S.C. § 1125(c)(2)(A). In determining the degree of recognition, the court may consider 2 “The California Anti-dilution statute is similar” to the Federal trademark dilution act. Panavision Intern., L.P. v. Toeppen, 141 F.3d 1316, 1324 (9th Cir. 1998). “The protection extends only to strong and well recognized marks.” Id. Because the statutes are so similar, CWS’s “state law dilution claim is subject to the same analysis as its federal claim.” Id. Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 18 of 30 Page ID #:124 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 11 - 2:17-cv-02574-PSG-E these factors: “(1) ‘[t]he duration, extent, and geographic reach of advertising and publicity of the mark’; (2) ‘[t]he amount, volume, and geographic extent of sales of goods or services offered under the mark’; (3) ‘[t]he extent of actual recognition of the mark’; and (4) whether the mark is registered. Celebrity Chefs Tour at 1168. The “element of fame is the key ingredient.” Johnson & Johnson v. The American Nat. Red Cross, 552 F. Supp. 2d 434, 447 (S.D.N.Y 2008). The purpose of the dilution statute “was to restrict dilution causes of action to those few truly famous marks like Budweiser beer, Camel cigarettes, Barbie Dolls,” Dupont, Buick, Kodak, and the like. Luv N’ Care, Ltd. v. Regent Baby Products Corp., 841 F. Supp. 2d 753, 758 (S.D.N.Y. 2012). The standard of fame under the statute “is whether a mark is recognized not merely by ‘a large segment of the population,’ but by the ‘general consuming public of the United States,” therefore, niche fame is not famous enough. Id. at 758-759. CWS alleges “VNN has commercially used, reproduced, copied, or colorably imitated the CWS Mark, in connection with the sale, offering for sale, distribution and/or advertising of the exact or substantially similar products and services in a manner which has caused and will likely continue to cause confusion, mistake, or deception among the purchasing public as to the source of VNN’s goods. Not only has VNN used the identical mark in commerce, they have used it for the identical products and services. VNN’s conduct in this regard is likely to dilute the distinctive qualities of the CWS Mark.” Counterclaim ¶ 67.3 CWS also pleads that “CWS has established a substantial customer base and customer recognition with respect to the software services it offers.” Counterclaim ¶ 7. Such conclusory allegations have been routinely rejected by courts analyzing dilution claims. Celebrity Chefs Tour at 1168 (granting motion to dismiss federal dilution claim where plaintiff failed to “allege any facts concerning wide-reaching 3 Allegations for CWS’s state dilution claim are set forth almost identically at Counterclaim ¶ 76. Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 19 of 30 Page ID #:125 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 12 - 2:17-cv-02574-PSG-E access to, much less recognition of, their mark” and “no allegations about any advertising and publicity efforts.”); Luv N’ Care at 757 (court granting motion to dismiss federal dilution claim after finding that plaintiff failed to plead facts alleging their marks were similarly famous to Nike and Hot Wheels, or the like, and for failing to plead facts regarding advertising, publicity, or that their marks are registered.); Goldline, LLC v. Regal Assets, LLC, No. CV-14-03680, 2015 WL 1809301 at 3-4 (C.D. Cal. April 21, 2015) (despite alleging its mark is famous, court found that plaintiff’s conclusory allegations that merely recited a requisite element of the claim failed to satisfy Twombly and Iqbal for purposes of Rule 12(b)(6) analysis). CWS fails to allege that their mark is famous or that they registered the mark. CWS failed to allege any facts regarding the actual recognition of their mark, any facts related to advertising or publicity, or any facts related to sales of goods under the mark. It is indisputable that CWS does not possess a modicum of the level of fame as companies such as Budweiser, Camel, Buick, etc., and therefore will never be able to allege a valid cause of action of dilution. For this reason, CWS’s claims for dilution should be dismissed with prejudice. G. CWS’S CLAIM FOR STATE TRADEMARK INFRINGEMENT FAILS AS A MATTER OF LAW Next, the Court should dismiss the seventh counterclaim for trademark infringement. CWS alleges that “VNN’s willful, deliberate, and unauthorized use of the CWS Mark has caused confusion and is likely to continue to cause confusion, mistake, and deception in that customers are likely to associate and believe VNN is associated with, connected to, affiliated with, authorized by, endorsed by, licensed by, and/or sponsored by CWS, in violation of California Business & Professions Code § 14245(a)(1).” It is indisputable that CWS has failed to allege that the CWS Mark is Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 20 of 30 Page ID #:126 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 13 - 2:17-cv-02574-PSG-E registered. This is a fatal flaw. Section 14245 only provides protection to “the owner of the registered mark.” Cal. Bus. & Prof. Code § 14245(a). Courts in this district have dismissed analogously plead claims with prejudice. Dream Marriage Group Inc. v. Anastasia Intern., Inc., No. CV-10-5034, 2010 WL 4346111 at *1 (C.D. Cal. Oct. 27, 2010) (dismissing with prejudice because “Plaintiff failed to plead facts affirming that it has a registered trademark in California, Plaintiff did not plead sufficient facts under a cognizable legal theory upon which it can recover.”). Because CWS failed to allege that its trademark is registered, CWS’s claim for state trademark infringement should be dismissed with prejudice. H. CWS’S FAILS TO STATE A CLAIM FOR PALMING OFF CWS’s ninth counterclaim for palming off should also be dismissed. “Palming/passing off involves selling a product of one person’s creation under another’s name or mark of another. Express palming/passing off arises when a business labels its goods or services with a mark identical to that of another enterprise, or otherwise expressly misrepresents the origin of the goods or services. Implied palming/passing off involves the use of a competitor's advertising material, or a sample or photograph of the competitor's product, to impliedly represent that the product being sold is made by the competitor.” GNI Waterman LLC v. A/M Valve Co. LLC, No. CV-F-07-0863, 2007 WL 2669503 at *4 (E.D. Cal. Sept. 7, 2007) (internal citations and quotation marks omitted). Reverse palming/passing off is the inverse, i.e. “when a wrongdoer removes the name or trademark on another party’s product and sells that product under a name chosen by the wrongdoer.” Id. CWS alleges “VNN’s goods and services are exact and/or substantially similar in nature to CWS’s goods and services and, thus unfairly compete with CWS.” Counterclaim ¶ 80. “VNN intentionally and deceptively engaged in their product/services to mislead customers into believing that the goods and services are Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 21 of 30 Page ID #:127 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 14 - 2:17-cv-02574-PSG-E related to, or authorized by, CWS.” Counterclaim ¶ 81. Whatever those allegations are, they do not constitute palming off. Those conclusions do not even relate to or suggest that VNN sold CWS’s goods with VNN’s label (or sold VNN’s goods with CWS’s label), much less provide a factual basis for stating a claim that can survive a Rule 12(b)(6) analysis. See Variant Displays, Inc. v. Absolute Exhibits, Inc., No. SACV-15-10685, 2016 WL 7486281 at *3 (C.D. Cal. Feb. 12, 2016) (granting motion to dismiss because plaintiff “has not alleged facts plausibly suggesting either express or implied passing off”); Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1153 (9th Cir. 2008) (no claim was stated because plaintiff did not allege that defendants passed off their goods as those of another). CWS has utterly failed to allege sufficient facts to state a claim for relief, therefore, CWS’s claim for palming off should be dismissed. I. CWS FAILS TO STATE A CLAIM FOR FALSE ADVERTISING UNDER BUS. & PROF. CODE SECTION 17500 ET SEQ. Next, CWS’s tenth counterclaim for false advertising under California Business and Professions Code section 17500 should be dismissed. California’s false advertising law “makes it unlawful for a business to disseminate any statement ‘which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading…’” Moss v. Infinity Ins. Co., 197 F.Supp.3d 1191, 1199 (N.D. Cal. 2016). If a Section 17500 claim is alleged that does not have its basis in fraud, the court conducting a 12(b)(6) analysis must “determine whether a claim has been stated under the notice pleading standards of Rule 8(a). Under that standard, a Section 17500 claim must be alleged with ‘reasonable particularity.’” Id. at 1199-1200. CWS alleges that as “a result of VNN’s false and misleading advertising, potential and actual consumers have been, and will continue to be, misled about the source and legitimacy of the goods and services being wrongfully marketed, Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 22 of 30 Page ID #:128 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 15 - 2:17-cv-02574-PSG-E advertised, and sold bearing the CWS Mark in which CWS has established common law rights. VNN knew that the advertising was untrue and misleading and willfully continue to advertise and sell such goods and services to consumers.” Counterclaim ¶ 87. Which advertisements were untrue or misleading? One certainly cannot tell by reading CWS’s counterclaim. Such factual omissions are fatal. See Moss at 1200 (“Plaintiff has not met even the more liberal Rule 8 requirements. Plaintiff fails to identify what advertisements and materials give rise to her false advertising claim and therefore does not give [defendant] adequate notice of its alleged violations.”); In re Sony Grand Wega KDF-E A10/A20 Series Rear Projection HDTV Television Litigation, 758 F.Supp.2d 1077, 1093 (S.D. Cal. 2010) (“Plaintiffs have failed to identify specific advertisements, when and where they were shown, or why they were untrue or misleading. Whether governed by Rule 9(b) or Rule 8's more lax pleading standards, Plaintiffs' failure to identify specific advertisements does not provide [defendant] with adequate notice of its alleged violations of the FAL.”). CWS alleges nothing more than conclusory statements that VNN falsely advertised and that VNN knew it falsely advertised. As it is devoid of any factual allegations regarding what statement was false or misleading, CWS’s claim for false advertising fails to state a claim, and should be dismissed. J. CWS FAILS TO STATE A CLAIM FOR UNFAIR COMPETITION UNDER BUS. & PROF. CODE SECTION 17200 Next, CWS’s eleventh counterclaim for unfair competition under California Business and Professions Code section 17200 should be dismissed. Section 17200 (the “UCL”) prohibits “any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” Carter v. Bank of America, N.A., No. CV-12-06424, 2012 WL 12887542 at *9 (C.D. Cal. Dec. 12, Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 23 of 30 Page ID #:129 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 16 - 2:17-cv-02574-PSG-E 2012). “An act can be alleged to violate any or all of the three prongs of the UCL-unlawful, unfair, or fraudulent.” Id. 1. CWS Fails To Plead Unlawful Business Practices “For an action based upon an allegedly unlawful business practice, the UCL ‘borrows violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable.’” Id. at *10. “Thus, the ‘unlawful’ prong requires an underlying violation of law.” Joe Hand Promotions, Inc. v. Alvarado, No. 1:10-cv-00907, 2011 WL 1544501 at *7 (E.D. Cal. April 21, 2011). “Allegations supporting a claim under the unlawful prong of the UCL ‘must state with reasonable particularity the facts supporting the ... elements’ of the alleged violation.” Carter at *10. CWS alleges that VNN committed an unlawful act by “(1) the infringement of CWS’s trademark rights.” Counterclaim ¶ 91. As to infringement of trademark rights, it has already been established above and below that VNN was explicitly granted a license to all of CWS’s intellectual property, thus barring any infringement claim by CWS. See Partnership Agreement § 7.1. Additionally, because the “unlawful” prong requires an underlying violation of law, this allegation rests completely on the validity of CWS’s trademark infringement claim. As established above, CWS’s trademark infringement claim fails as a matter of law, and is therefore, unable to be used as a predicate unlawful wrong here. CWS’s other unlawful act allegation is that VNN committed “(2) the misappropriation and conversion of confidential information to gain an unfair competitive advantage in the marketplace.” Counterclaim ¶ 91. Such allegedly unlawful activity is governed by the Partnership Agreement, not tort. The Confidential Information section of the Partnership Agreement states: “[e]ach party agrees that it will not use in any way, for its own account or the account of any third party, except as necessary to meet its obligations under this Agreement, nor disclose to any third party… any of the other party’s Confidential Information and Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 24 of 30 Page ID #:130 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 17 - 2:17-cv-02574-PSG-E will take reasonable precautions to protect the confidentiality of such information.” Partnership Agreement § 9.1. CWS’s allegations fall squarely within what conduct is governed by the Partnership Agreement. CWS cannot attempt to create an unlawful action, out of conduct that is not independently actionable. In fact, CWS is attempting to turn an alleged breach of contract into a UCL action, which is prohibited. Joe Hand at fn. 4 (“claims of negligence or breach of contract may not be relied upon in the determination of ‘unlawful’ acts under § 17200”); Wang & Wang LLP v. Banco Do Brasil, S.A., No. Civ.-S-06-00761, 2007 WL 915232 at *4 (E.D. Cal. Mar. 26, 2007) (“all that remains is a naked claim for breach of contract, which, standing alone, is an insufficient basis for a § 17200 claim.”). Furthermore, even if this was independently actionable, CWS fails to identify a “particular section of the statutory scheme which was violated” as required under Khoury v. Maly’s of California, Inc., 14 Cal. App. 4th 612, 619 (1993). Furthermore, neither “unlawful act” was plead with any factual enhancement supporting whatever trademark infringement or whatever misappropriation and conversion of confidential information took place. The Rule 8(a) standard is liberal, however, in order to properly state a Section 17200 claim CWS needs to plead with “reasonable particularity the facts supporting the violation.” Khoury, at 619 (dismissing a Section 17200 claim because the allegation that “Defendants breached this statute by refusing to sell [the JPM products] to plaintiff, for the purpose of ruining and interfering with his beauty and supply business, with the effect of misleading plaintiff’s customers” failed “to describe with any reasonable particularity the facts supporting the violation.”) Therefore, CWS fails to state a claim for unlawful business practices. 2. CWS Fails To Plead Unfair Business Practices CWS’s “unfair” business practices claim is also subject to dismissal. “[A] practice may be deemed unfair even if not specifically proscribed by some other Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 25 of 30 Page ID #:131 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 18 - 2:17-cv-02574-PSG-E law… To state a viable claim for relief under the “unfair” prong of the UCL, plaintiff must show that “(1) the consumer injury [is] substantial; (2) the injury [is] not ... outweighed by any countervailing benefits to consumers or competition; and (3) it [is] an injury that consumers themselves could not reasonably have avoided.” Carter at *11. CWS alleges that “VNN’s acts and business practices as described above are unfair since they violate California’s public policy against unjustly enriching one party at the expense of another. CWS has sustained injuries resulting from the above-described conduct, in particular the misappropriation and use of the CWS Mark in the marketplace, and the injury is not outweighed by any offsetting consumer or competitive benefits of that practice.” Counterclaim ¶ 91. As an initial matter, CWS fails to plead the third element that “it is an injury that consumers themselves could not reasonably have avoided,” and therefore fails on that basis alone. As to the “misappropriation and use of the CWS Mark in the marketplace”, it has been established above that CWS has failed to plead any facts supporting that conclusion. Lastly, claims based on mere conclusions, such as what has been alleged by CWS are routinely dismissed by California district courts. Carter at *11 (dismissing unfair practices claim due to plaintiff’s failure to plead facts supporting any element of a claim under the unfair practices prong, beyond conclusory allegations); Watkinson v. MortgageIT, Inc., No. 10-CV-327, 2010 WL 2196083 at *7 (S.D. Cal. June 1, 2010) (dismissing unfair practices claim because plaintiff only plead conclusory allegations). As it is indisputable that CWS failed to plead any actual factual allegations supporting this claim, CWS’s claim for unfair and unlawful business practices fails to state a claim, and CWS’s Section 17200 claim should be dismissed. Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 26 of 30 Page ID #:132 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 19 - 2:17-cv-02574-PSG-E K. CWS FAILS TO STATE A CLAIM FOR INTENTIONAL OR NEGLIGENT INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE Finally, the Court should dismiss CWS’s twelfth and thirteenth counterclaims for intentional and negligent interference with prospective economic advantage. The elements for intentional interference with prospective economic advantage are: “(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.”4 Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1153 (2003). A plaintiff must plead as part of its case-in-chief that defendant’s conduct was “wrongful by some legal measure other than the fact of interference itself.” Id. As to the first element, CWS alleges “[a]n economic relationship existed between CWS and consumers it previously sold its goods and services to as well as prospective consumers with the probability of substantial future economic benefits to CWS.” Counterclaim ¶ 96. “[A]s to both interference with economic advantage claims, Plaintiff's claims fail because Plaintiff has not identified the specific relationship with which Defendant is alleged to have interfered. Courts have held that, in order to state a claim for intentional interference with prospective business advantage, it is essential 4 The elements for proving negligent interference with prospective economic advantage are: “(1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected...” Damabeh v. 7-Eleven, Inc., No. 5:12-CV-1739, 2013 WL 1915867 at *8 (N.D. Cal. May 8, 2013). These elements are very similar to those for intentional interference with prospective economic advantage, with the first element being identical. Because of their similarity, they will be analyzed together. Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 27 of 30 Page ID #:133 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 20 - 2:17-cv-02574-PSG-E that the Plaintiff allege facts showing that Defendant interfered with Plaintiff's relationship with a particular individual.” Damabeh v. 7-Eleven, No. 5:12-CV- 1739, 2013 WL 1915867 at *10 (N.D. Cal. May 8, 2013). “Requiring the plaintiff to identify a particular relationship or opportunity with which the defendant's conduct is alleged to have interfered serves the purpose of ensuring that there is a sufficient ‘factual basis’ from which it may be inferred that there was a benefit that ‘the plaintiff was likely to have ... received’ and that the defendant's conduct interfered with plaintiff's receipt of this benefit.” Id. This requirement of identifying a particular customer relationship also applies to claims for negligent interference with prospective business advantage. Id. citing to Blue Dolphin Charters, Ltd. v. Knight & Carver Yachtcenter, Inc., No. 11-CV-565, 2011 WL 5360074 at *5 (S.D. Cal. Nov. 3, 2011) In Damabeh, the court found that the allegation that “Plaintiff had a prospective business relationship with his employees and customers, and had a significant probability of future economic benefit from those business relationships” failed to meet this pleading standard. Damabeh at *9; See also UMG Recordings, Inc. v. Global Eagle Entertainment, Inc., 117 F.Supp.3d 1092, 1117- 1118 (C.D. Cal. 2015) (dismissing intentional and negligent interference with prospective business advantage claims because none of the purported prospective relationships were identified with particularity). Similarly CWS’s allegation that an “economic relationship existed between CWS and consumers it previously sold its goods and services to as well as prospective consumers” fails to identify a specific business relationship that was interfered with. Both of CWS’s interference claims fail for this reason. CWS’s negligent interference with prospective business advantage claim also fails because CWS fails to allege that VNN owed it a duty of care. Damabeh at *9 (finding that a “duty of care existed between Defendant and Plaintiff by virtue of the franchisor-franchisee relationship” was a “bare allegation that did not suffice to Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 28 of 30 Page ID #:134 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 21 - 2:17-cv-02574-PSG-E establish that Defendant owed Plaintiff a duty of care.”) CWS fails to even assert a “bare allegation.” It completely overlooked its requirement to plead that VNN owed CWS a duty of care. See Counterclaim ¶¶ 103-107. For its intentional interference claim, CWS failed to allege that VNN engaged in an independently wrongful act as required by Korea Supply. Korea Supply stated that “while intentionally interfering with an existing contract is ‘a wrong in and of itself’ [citation], intentionally interfering with a plaintiff's prospective economic advantage is not. To establish a claim for interference with prospective economic advantage, therefore, a plaintiff must plead that the defendant engaged in an independently wrongful act. [citation] An act is not independently wrongful merely because defendant acted with an improper motive.” Korea Supply at 1158. The closest that CWS comes to alleging an independent wrong is when it pleads “VNN knew or should have known that its conduct to sell to these consumers through the unauthorized use of CWS’ own property would deprive CWS of substantial amounts of monies.” Counterclaim ¶ 97. However, as stated above, Section 7.1 explicitly granted VNN a one year license to use all of CWS’s intellectual property. Therefore, any use of CWS’s intellectual property by VNN would be nothing more than VNN exercising its contractual rights, and the “exercise of contractual rights… is not wrongful conduct actionable as intentional interference with prospective economic relations.” Damabeh at *9; See also Korea Supply at 1159 (finding an independent wrong alleged that defendant engaged in bribery and offered sexual favors to key officials in order to obtain the contract). CWS’s allegations are a far cry away from the actionable independent wrongs seen in Korea Supply. Lastly, for the intentional interference claim CWS fails to allege that VNN intended to interfere with CWS’s relations with third parties. Allegations that VNN “either desires to bring about the interference or knows that interference is Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 29 of 30 Page ID #:135 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 22 - 2:17-cv-02574-PSG-E certain or substantially certain to occur as a result of its action” are necessary to adequately plead intentional interference. Korea Supply at 1160. Allegations that “VNN knew or should have known” as plead in Counterclaim ¶ 97 sound in negligence, not intentional torts, and therefore fail. In light of the foregoing, CWS has failed to plead sufficient facts to state a claim for intentional or negligent interference with prospective economic advantage; therefore, CWS’s claims for both should be dismissed with prejudice. III. CONCLUSION Outside of the breach of contract and accounting claims, CWS’s Counterclaim lacks any meaningful factual allegations to support its claims. Therefore, as to those claims, CWS has not met its burden under Rule 8(a) or fail for other above-stated reasons, therefore, VNN respectfully requests that this Court dismiss CWS’s counterclaims two through thirteen, with prejudice where requested. Dated: June 30, 2017 BARNES & THORNBURG LLP Levi W. Heath Joseph M. Wahl By:/s/Joseph M. Wahl Levi W. Heath Joseph M. Wahl Attorneys for Plaintiff and Counter- Defendant VARSITY NEWS NETWORK, INC. Case 2:17-cv-02574-PSG-E Document 14 Filed 06/30/17 Page 30 of 30 Page ID #:136 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:17-cv-02574-PSG-E UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION VARSITY NEWS NETWORK, INC., a Delaware corporation, Plaintiff, v. CARTY WEB STRATEGIES, INC., a California corporation, Defendant. Case No. 2:17-cv-02574-PSG-E [PROPOSED] ORDER GRANTING VARSITY NEWS NETWORK, INC.’S MOTION TO DISMISS COUNTERCLAIM Date: August 28, 2017 Time: 1:30 p.m. Crtrm.: 6A Judge: Hon. Philip S. Gutierrez CARTY WEB STRATEGIES, INC., a California corporation, Counter-Claimant, v. VARSITY NEWS NETWORK, INC., a Delaware corporation; and ROES 1 through 20, inclusive, Counter-Defendant. Case 2:17-cv-02574-PSG-E Document 14-1 Filed 06/30/17 Page 1 of 3 Page ID #:137 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2:17-cv-02574-PSG-E ORDER This matter comes before the Court pursuant to Federal Rules of Civil Procedure 12(b)(6) and the motion of Varsity News Network, Inc. (“VNN”) to dismiss counterclaims two through thirteen of Carty Web Strategies, Inc.’s (“CWS”) Counterclaim. The Court, based on all the pleadings, papers, and arguments submitted by the parties, and for good cause shown, orders as follows: 1. VNN’s motion to dismiss CWS’s second counterclaim for breach of the implied covenant of good faith and fair dealing is GRANTED. The second counterclaim is dismissed without prejudice. 2. VNN’s motion to dismiss CWS’s third counterclaim for intentional misrepresentation is GRANTED. The third counterclaim is dismissed without prejudice. 3. VNN’s motion to dismiss CWS’s fourth counterclaim for negligent misrepresentation is GRANTED. The fourth counterclaim is dismissed with prejudice. 4. VNN’s motion to dismiss CWS’s fifth counterclaim for false designation of origin/federal unfair competition under the Lanham Act is GRANTED. The fifth counterclaim is dismissed without prejudice. 5. VNN’s motion to dismiss CWS’s sixth counterclaim for federal trademark dilution is GRANTED. The sixth counterclaim is dismissed with prejudice. 6. VNN’s motion to dismiss CWS’s seventh counterclaim for trademark infringement under California law is GRANTED. The seventh counterclaim is dismissed with prejudice. 7. VNN’s motion to dismiss CWS’s eighth counterclaim for California trademark dilution is GRANTED. The eighth counterclaim is dismissed with prejudice. 8. VNN’s motion to dismiss CWS’s ninth counterclaim for palming off is Case 2:17-cv-02574-PSG-E Document 14-1 Filed 06/30/17 Page 2 of 3 Page ID #:138 BARNES & THORNBURG LLP ATTORNEYS AT LAW LOS ANGELES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 2 - 2:17-cv-02574-PSG-E GRANTED. The ninth counterclaim is dismissed without prejudice. 9. VNN’s motion to dismiss CWS’s tenth counterclaim for false advertising is GRANTED. The tenth counterclaim is dismissed without prejudice. 10.VNN’s motion to dismiss CWS’s eleventh counterclaim for violation of California Business & Professions Code Section 17200 is GRANTED. The eleventh counterclaim is dismissed without prejudice. 11.VNN’s motion to dismiss CWS’s twelfth counterclaim for intentional interference with prospective economic advantage is GRANTED. The twelfth counterclaim is dismissed with prejudice. 12.VNN’s motion to dismiss CWS’s thirteenth counterclaim for negligent interference with prospective economic advantage is GRANTED. The thirteenth counterclaim is dismissed with prejudice. IT IS SO ORDERED. Dated: Hon. Philip S. Gutierrez U.S. District Court Judge Case 2:17-cv-02574-PSG-E Document 14-1 Filed 06/30/17 Page 3 of 3 Page ID #:139