LegalForce RAPC Worldwide P.C. et al v. Swyers et al, No. 3:2017cv07318 - Document 91 (N.D. Cal. 2018)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART TTC DEFENDANTS' MOTION TO DISMISS; GRANTING TRADEMARK DEFENDANTS' MOTION TO DISMISS; AFFORDING PLAINTIFF LIMITED LEAVE TO AMEND. The First Claim for Relief is dismissed without leave to amen d. The Second Claim for Relief, to the extent based on "Created by the Top Trademark Law Firm in the United States" and "As Featured in," is dismissed with leave to amend; in all other respects, the Second Claim for Relief is not subject to dismissal. The Third Claim for Relief is dismissed with leave to amend, with the exception of RAPC's claim for injunctive relief based on the alleged unauthorized practice of law by TTC, which claim is not subject to dismissal. RAPC i s afforded leave to amend solely as to the Second and Third Claims for Relief; any Third Amended Complaint shall be filed no later than October 31, 2018. Signed by Judge Maxine M. Chesney on October 12, 2018. (mmclc1, COURT STAFF) (Filed on 10/12/2018)
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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 LEGALFORCE RAPC WORLDWIDE P.C., 10 Plaintiff, United States District Court Northern District of California 11 12 v. MATTHEW H SWYERS, et al., 13 Defendants. Case No. 17-cv-07318-MMC ORDER GRANTING IN PART AND DENYING IN PART TTC DEFENDANTS’ MOTION TO DISMISS; GRANTING TRADEMARK DEFENDANTS’ MOTION TO DISMISS; AFFORDING PLAINTIFF LIMITED LEAVE TO AMEND Re: Dkt. Nos. 81, 82 14 15 16 Before the Court are two motions to dismiss plaintiff LegalForce RAPC Worldwide, 17 P.C.’s (“RAPC”) Second Amended Complaint: (1) defendants TTC Business Solutions, 18 LLC (“TTC”) and Matthew H. Swyers’ (“Swyers”) (collectively, “TTC Defendants”) Motion 19 to Dismiss, filed August 10, 2018; and (2) defendants The Trademark Company LLC 20 (“Trademark LLC”) and The Trademark Company PLLC’s (“Trademark PLLC”) 21 (collectively, “Trademark Defendants”) Motion to Dismiss, filed August 13, 2018. The 22 motions have been fully briefed. Having read and considered the papers filed in support 23 of and in opposition to the motions, the Court rules as follows.1 24 BACKGROUND 25 In the operative complaint, the Second Amended Complaint (“SAC”), RAPC 26 alleges it is a law firm that practices “trademark law before the United States Patent and 27 28 1 By order filed September 17, 2018, the Court took the matters under submission. 1 Trademark Office (‘USPTO’)” (see SAC ¶ 2), and that it “offers trademark filing services” 2 through the “Trademarkia.com website” (see SAC ¶ 46). United States District Court Northern District of California 3 RAPC alleges that Swyers, an attorney, is the owner of TTC and Trademark LLC, 4 each of which provides “trademark related services” (see SAC ¶¶ 3, 11, 13), and the 5 owner of Trademark PLLC, a law firm that provides “legal services in trademark related 6 matters” (see SAC ¶¶ 3, 10). RAPC alleges that TTC operates the website "TTC 7 Business Solutions," on which it has made "false” statements. (See SAC ¶ 68). RAPC 8 further alleges that the “trademark business” of TTC, Trademark LLC, and Trademark 9 PLLC “is built upon the foundation of the unauthorized practice of law” (see SAC ¶ 7), 10 and that all defendants “have been submitting or aiding and abetting their customers in 11 submitting fraudulent specimens to the USPTO” (see SAC ¶ 32; see also SAC ¶ 77).2 12 Based on the above allegations, RAPC asserts in the SAC three Claims for Relief: 13 (1) "Declaratory Judgment"; (2) "False or Misleading Advertising [under] the Lanham Act, 14 15 U.S.C. § 1125(a)"; and (3) "California Unfair Competition [under] Cal. Bus. & Prof. 15 Code § 17200 et seq." The First and Second Claims are alleged against TTC only, while 16 the Third Claim is alleged against all defendants. LEGAL STANDARD 17 18 Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure "can be 19 based on the lack of a cognizable legal theory or the absence of sufficient facts alleged 20 under a cognizable legal theory." See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 21 699 (9th Cir. 1990). Rule 8(a)(2), however, "requires only 'a short and plain statement of 22 the claim showing that the pleader is entitled to relief.'" See Bell Atlantic Corp. v. 23 Twombly, 550 U.S. 544, 555 (2007) (quoting Fed. R. Civ. P. 8(a)(2)). Consequently, "a 24 complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual 25 allegations." See id. Nonetheless, "a plaintiff's obligation to provide the grounds of his 26 27 28 2 As set forth in its order of July 17, 2018, the Court understands the word "specimen" to refer to the "mark as used on or in connection with the goods or services" that is submitted for registration to the USPTO. See 37 C.F.R. § 2.56(a). 2 1 entitlement to relief requires more than labels and conclusions, and a formulaic recitation 2 of the elements of a cause of action will not do." See id. (internal quotation, citation, and 3 alteration omitted). In analyzing a motion to dismiss, a district court must accept as true all material United States District Court Northern District of California 4 5 allegations in the complaint, and construe them in the light most favorable to the 6 nonmoving party. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). "To 7 survive a motion to dismiss, a complaint must contain sufficient factual material, accepted 8 as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 9 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). "Factual allegations must be 10 enough to raise a right to relief above the speculative level[.]" Twombly, 550 U.S. at 555. 11 Courts "are not bound to accept as true a legal conclusion couched as a factual 12 allegation." See Iqbal, 556 U.S. at 678 (internal quotation and citation omitted). 13 DISCUSSION 14 In their respective motions, defendants argue that each of RAPC’s claims is 15 subject to dismissal. 16 A. Federal Claim: Lanham Act The Lanham Act prohibits any "false or misleading description of fact, or false or 17 18 misleading representation of fact, which . . . in commercial advertising or promotion, 19 misrepresents the nature, characteristics, qualities, or geographic origin of his or her or 20 another's goods, services, or commercial activities." See 15 U.S.C. § 1125(a)(1). In the Second Claim for Relief, RAPC alleges that TTC has made false statements 21 22 on its website that “misrepresent the nature, characteristics, and quality of TTC’[s] 23 services.” (See SAC ¶ 70.) RAPC alleges that “as a result of TTC’s false 24 advertisements, RAPC has been injured, including[,] but not limited to, lost customers, 25 direct diversion of sales from RAPC to TTC, decline in sales and market share, lost 26 profits, having to pay increased advertising costs, loss of goodwill, and additional losses 27 and damages.” (See SAC ¶ 71.) 28 // 3 1 1. Standing 2 To establish standing for purposes of Article III, a plaintiff must allege at the 3 pleading stage and thereafter prove both an “injury in fact” and a “causal connection 4 between the injury and the conduct complained of.” See Lujan v Defenders of Wildlife, 5 504 U.S. 555, 560 (1992) (internal quotation and citation omitted) 6 United States District Court Northern District of California 7 The TTC Defendants argue that RAPC fails to allege facts to support a finding that RAPC suffered an injury in fact caused by TTC’s alleged false advertising. 8 “[W]hen [a] plaintiff competes directly with [a] defendant,” however, “a 9 misrepresentation will give rise to a presumed commercial injury that is sufficient to 10 establish standing,” see TrafficSchool.com v. Edriver, Inc., 653 F.3d 820, 826-27 (9th Cir. 11 2011), and RAPC alleges it “compete[s]” with TTC to provide “small businesses” with 12 “services that allow them to protect their marks through filings with the [USPTO].” (See 13 SAC ¶ 5.)3 14 15 Accordingly, the TTC Defendants have not shown RAPC’s Lanham Act claim is subject to dismissal for failure to allege standing. 16 2. Proximate Cause 17 The TTC Defendants further argue that RAPC fails to allege sufficient facts to 18 support a finding that TTC’s alleged false statements were a proximate cause of RAPC’s 19 asserted injuries. See Lexmark Int’l., Inc. v. Static Control Components, Inc., 572 U.S. 20 118, 134 n.6 (2014) (holding proximate cause is “element” of Lanham Act claim). 21 A “proximate cause analysis” considers “whether the harm alleged has a 22 sufficiently close connection to the conduct the statute prohibits.” See id. at 133. With 23 respect to the Lanham Act, a plaintiff establishes proximate cause where, for example, a 24 competitor makes “false statements about his own goods . . . and thus induc[es] 25 customers to switch.” See id. at 137; see also id. at 138 (noting “diversion of sales to a 26 27 28 3 As set forth above and as further described below, RAPC alleges TTC has made a number of misrepresentations on its website. 4 United States District Court Northern District of California 1 direct competitor may be the paradigmatic direct injury from false advertising”). Here, 2 RAPC alleges it has “lost customers” to TTC (see SAC ¶ 71), which allegation is 3 supported by the further allegation that, from 2015, the year TTC was “[f]ormed,” to 2017, 4 the year RAPC filed the instant action, RAPC’s “market share” has “decline[d]” from 5 “nearly 2.4%” to “approximately 1.8%,” a loss that, according to RAPC, corresponds to 6 “approximately 2670 trademark[ ] filings per year” (see SAC ¶¶ 11, 58). In addition, 7 RAPC alleges, it has had to reduce its prices from “$499 to $199 and lower to match the 8 unfair competition of TTC.” (See SAC ¶ 56.) Irrespective of any difficulty RAPC may 9 encounter in proving such allegations, see TrafficSchool.com, 653 F.3d at 831 (affirming 10 district court’s denial of request for monetary award based on lost profits, where plaintiff 11 failed to offer “any proof of past injury or causation”), the Court finds them sufficient at the 12 pleading stage. 13 14 Accordingly, the TTC Defendants have not shown RAPC’s Lanham Act claim is subject to dismissal for failure to sufficiently allege proximate cause. 15 3. Whether Specific Statements Are Actionable 16 As noted, RAPC bases its Lanham Act claim on several statements by TTC, none 17 of which, the TTC Defendants argue, is actionable. The Court considers the challenged 18 statements in turn. 19 20 21 22 a. “Created by USPTO Attorneys”; “Created by U.S. Patent & Trademark Office Attorneys”; “Created by former U.S. Patent & Trademark (‘USPTO’) Attorneys”; Created by former U.S. Patent & Trademark Attorneys”; Created by former Attorneys With the USPTO” RAPC alleges that TTC’s website includes the following statements (see SAC 23 ¶ 68.a): (1) “Created by USPTO Attorneys” (see SAC Exs. 1, 3, 6, 7, 8); (2) “Created by 24 U.S. Patent & Trademark Office Attorneys” (see SAC Exs. 2, 5, 9); (3) “Created by former 25 U.S. Patent & Trademark (‘USPTO’) Attorneys” (see SAC Ex. 6); (4) “Created by former 26 U.S. Patent & Trademark Attorneys” (see SAC Exs. 10, 12); and (5) “Created by former 27 28 5 1 Attorneys with the USPTO” (see SAC Ex. 13).4 RAPC alleges the above-quoted 2 statements are false for the reason that TTC was not created by “more than one USPTO 3 Attorney[ ],” but, rather, “by just one former USPTO Attorney – Swyers.” (See SAC 4 ¶ 68.a.) Further, RAPC alleges, the statements, to the extent they do not include the 5 word “former,” are false for the additional reason that Sywers “was excluded from 6 practice by the USPTO in January 2017” (see SAC ¶¶ 3, 68.a) and cannot apply for 7 reinstatement for “at least five years” (see SAC ¶ 35). The TTC Defendants argue that the Lanham Act claim, to the extent based on the 8 9 10 above-quoted statements, is subject to dismissal for failure to comply with Rule 9(b) of the Federal Rules of Civil Procedure. As set forth below, the Court disagrees. “Averments of fraud must be accompanied by 'the who, what, when, where, and United States District Court Northern District of California 11 12 how' of the misconduct charged." Vess v. Ciba-Geigy Corp., USA, 317 F.3d 1097, 1106 13 (9th Cir. 2003) (setting forth requirements for compliance with Rule 9(b)). Here, by 14 alleging the statements were made by TTC on its TTC Business Solutions website and 15 appeared on that website as of the date of the filing of the SAC (see SAC ¶ 68.a.i), RAPC 16 has sufficiently pleaded the “who,” the “when,” and the “where” required by Rule 9(b). 17 Next, RAPC has sufficiently pleaded the “what,” by quoting in the SAC each challenged 18 statement and identifying each page on which each such statement can be found, as well 19 as attaching to the SAC a copy of each webpage on which each such statement is 20 located. (See SAC ¶ 68, Exs. 1-3, 5-10, 12-13.) Lastly, RAPC has sufficiently pleaded 21 the “how” by, as set forth above, explaining that the use of the plural “Attorneys” is false 22 because “TTC was created by just one former USPTO Attorney – Swyers” (see SAC 23 ¶ 68.a), and by explaining that TTC’s references to Swyers as “a USPTO Attorney 24 without the word ‘former’ [is] false” (see id.) because the USPTO, in January 2017, 25 excluded him from practice for a period of at least five years (see SAC ¶¶ 3, 35). 26 // 27 28 4 The Court discusses these statements collectively, as do the parties. 6 1 Accordingly, to the extent RAPC’s Lanham Act claim is based on “Created by 2 USPTO Attorneys,” “Created by U.S. Patent & Trademark Office Attorneys,” “Created by 3 former U.S. Patent & Trademark (‘USPTO’) Attorneys,” “Created by former U.S. Patent & 4 Trademark Attorneys,” and “Created by former Attorneys with the USPTO,” the TTC 5 Defendants have not shown the claim is subject to dismissal. b. “We’ve Prepared and Filed Over 20,000 Office Action Responses” 6 United States District Court Northern District of California 7 RAPC alleges that TTC’s website includes the following statement: “We’ve 8 Prepared and Filed Over 20,000 Office Action Responses.” (See SAC ¶ 68.b, Ex. 10.) 9 RAPC alleges the above-quoted statement is false for the reason that TTC “has not 10 prepared and filed over 20,000 Office Action responses since 2015” (see id.), the year in 11 which TTC was formed (see SAC ¶ 11). 12 The TTC Defendants argue said statement is not misleading because “it may refer 13 to TTC’s successor entities, or to other lawyers.” (See TTC Defs.’ Mot. at 12:25-13:1.) 14 Nothing in the SAC, however, makes reference to TTC’s having any successor or 15 predecessor in interest,5 and the TTC Defendants have not identified any portion of 16 TTC’s website on which any successor or predecessor is mentioned. Consequently, at 17 the pleading stage, the Court cannot find that, as a matter of law, a customer would 18 reasonably understand “we,” as used in the challenged statement, to include, even if TTC 19 has one, a successor or predecessor in interest. Nor can the Court, at the pleading 20 stage, find that, as a matter of law, a customer would reasonably understand “we” to 21 include “other lawyers,” namely, attorneys that TTC’s customers may select through its 22 “Network of Independent Attorneys” to help them “assembly [an] office response.” (See 23 TTC Defs.’ Mot. at 13:25-27.) Indeed, the TTC webpage cited by the TTC Defendants 24 expressly distinguishes between “we” and “your attorney” as follows: “Depending on the 25 package you select we, or your attorney you select through our Network of Independent 26 27 28 5 Although the SAC alleges that Swyers, prior to creating TTC in 2015, had created two other entities (see SAC ¶ 3), the SAC does not allege that TTC is the successor to either of those entities. 7 1 Attorneys (NIA) will work with you to assemble your office action response . . . .” (See id.; 2 see also SAC Ex. 6.) 3 Accordingly, to the extent RAPC’s Lanham Act claim is based on “We’ve Prepared 4 and Filed Over 20,000 Office Action Responses,” the TTC Defendants have not shown 5 the claim is subject to dismissal. c. “Created by the Top Trademark Law Firm in the United States” United States District Court Northern District of California 6 7 RAPC alleges that TTC’s website includes the following statement: “Created by 8 the Top Trademark Law Firm in the United States.” (See SAC ¶ 68.c, Exs. 11, 14, 15.) 9 RAPC alleges the above-quoted statement is false for the reason that “TTC, a limited 10 liability company, was created in July 2015 by Swyers personally as a sole member.” 11 (See SAC ¶ 68.c.) In the alternative, RAPC alleges that if Trademark PLLC, a law firm, 12 created TTC, TTC’s reference to said firm as being a “top” firm is false because 13 Trademark PLLC’s “owner,” i.e., Swyers, “was disbarred by the USPTO.” (See id.) 14 15 16 The TTC Defendants argue the statement is nonactionable. As discussed below, the Court agrees. First, although a statement by TTC that it was created by a law firm might support 17 a Lanham Act claim in light of RAPC’s allegation that TTC was created by an individual 18 and not a law firm, the three webpages on which the challenged statement is found 19 cannot reasonably be read as making such a statement. Rather, on each of the three 20 webpages, TTC advertises for sale a specific “package.” (See SAC Exs. 11, 14, 15.)6 In 21 so doing, TTC states that one of those packages was “created” by the unnamed “Top 22 Trademark Firm” (see SAC Ex. 11), and that the other two packages include “software” 23 the unnamed law firm “created” (see SAC Exs. 14,15). As RAPC does not allege that a 24 law firm did not create the packages and/or the software sold as part of the packages, 25 RAPC fails to allege any facts to support a finding that the statement is false. 26 27 28 The “packages” are identified on TTC’s website as, respectively, the “Standard Defense Package,” the “Second Request for Reconsideration Refusal to Register Package,” and the “Substantive Office Action Appellate Package.” (See id.) 6 8 1 2 unnamed law firm, such challenge is unavailing, as the reference constitutes 3 nonactionable puffery. See Cook, Perkiss & Liehe, Inc. Northern California Collection 4 Service Inc., 911 F.2d 242, 246 (9th Cir. 1990) (holding “puffery in advertisements" is 5 nonactionable under Lanham Act; describing puffery as “either vague or highly 6 subjective" assertions, for example, an advertisement that "states in general terms that 7 one product is superior"). 8 9 10 United States District Court Northern District of California Second, to the extent the claim challenges TTC’s use of “top” to describe the Accordingly, to the extent RAPC’s Lanham Act claim is based on “Created by the Top Trademark Law Firm in the United States,” the claim is subject to dismissal. d. “Trusted by over 100,000 Businesses Since 2003” 11 RAPC alleges that TTC’s website includes the following statement: “Trusted by 12 over 100,000 businesses since 2003.” (See SAC ¶ 68.d, Ex. 18.) RAPC alleges such 13 statement is false for the reason that “since 2015,” the year in which TTC was formed, it 14 has not had “over 100,000 customers.” (See SAC ¶ 68.d.) 15 As with their argument pertaining to “We’ve Prepared and Filed Over 20,000 Office 16 Action Responses,” the TTC Defendants contend “Trusted by over 100,000 businesses 17 since 2003” is not misleading because it would be understood as a reference to TTC’s 18 “predecessor.” (See TTC Defs.’ Mot. at 14:10-12.) For the reasons stated above with 19 respect to “We’ve Prepared and Filed Over 20,000 Office Action Responses,” however, 20 the Court cannot find at the pleading stage that, as a matter of law, a customer would 21 reasonably understand “we,” as used in the challenged statement, to refer to TTC’s 22 predecessor, if it has one. 23 Accordingly, to the extent RAPC’s Lanham Act claim is based on “Trusted by over 24 100,000 businesses since 2003,” the TTC Defendants have not shown the claim is 25 subject to dismissal. 26 27 28 e. “As Featured In” RAPC alleges that TTC’s website, “between at least October 2017 and May 2018,” had a webpage that contained the phrase “As featured in,” under which were displayed 9 1 “rotating banners showing logos” of a number of businesses, specifically, “Yahoo 2 Finance, CNNMoney.com, CNBC, Compare LegalForms, Bank of America Small 3 Business Community, Time, NBCNews.com, the Wall Street Journal, and INC500.” (See 4 SAC ¶ 68.e.i.)7 RAPC alleges the statement is false “because upon information and 5 belief, TTC has never been featured on these websites.” (See SAC ¶ 68.e.) The TTC Defendants argue RAPC’s allegation that the statement is false upon 6 7 “information and belief” is insufficient. The Court agrees. In particular, under Rule 9(b), 8 an allegation based upon “information and belief” must be “accompanied by a statement 9 of the facts upon which the belief is founded,” see Wool v. Tandem Computers Inc., 818 10 F.2d 1433, 1439 (9th Cir. 1987), and no such statement of facts is included in the SAC. Accordingly, to the extent RAPC’s Lanham Act claim is based on “As featured in,” United States District Court Northern District of California 11 12 the claim is subject to dismissal. 13 B. State Law Claims8 14 1. Section 17200 15 In the Third Claim for Relief, RAPC, as noted, alleges that all defendants have 16 violated § 17200. 17 // 18 // 19 20 21 22 23 24 25 26 27 28 7 According to RAPC. said webpage displayed, at any given time, three of those logos. (See SAC Ex. 20 first page (screen shot of webpage displaying logos of NBCNews.com, the Wall Street Journal, and INC500); SAC Ex. 20 second page (screen shot of webpage displaying logos of CNBC, Compare LegalForms, and Bank of America Small Business Community).) As the Court has not dismissed the entirety of RAPC’s federal claim, the Court finds it appropriate to exercise supplemental jurisdiction over the state law claims. The Court notes, however, that RAPC’s alternative allegations in support of diversity jurisdiction (see SAC ¶¶ 15-16) are insufficient for three reasons: (1) RAPC fails to allege the state in which it is “incorporated,” see 28 U.S.C. § 1332(c)(1); (2) RAPC fails to allege Sywers’ “state citizenship,” see Kanter v. Warner-Lambert Co., 265 F.3d 853, 857-58 (9th Cir. 2001); and (3) RAPC fails to allege the identity of the member or members of Trademark PLLC, and the citizenship of each such member, see Johnson v. Columbia Properties Anchorage, LP, 437 F. 3d 894, 899 (9th Cir. 2006) (holding LLC is “citizen of every state in which its owners/members are citizens”). 8 10 1 2 RAPC alleges TTC has violated § 17200 by submitting to the USPTO “fraudulent 3 specimens” (see SAC ¶¶ 77.a-b), and by engaging in the “unauthorized practice of law” 4 (see SAC ¶¶ 7, 77.a-b; see also SAC ¶ 75). 5 United States District Court Northern District of California a. Liability of TTC 1. Submission of Fraudulent Specimens 6 The TTC Defendants contend RAPC lacks standing to assert against TTC a 7 § 17200 claim based on the alleged submission of fraudulent specimens, and, in addition, 8 argue that such claim is not pleaded with the specificity required by Rule 9(b). As 9 discussed below, the Court agrees. 10 First, to establish standing at the pleading stage for purposes of Article III, a 11 plaintiff must, as noted above, allege an “injury in fact” and a “causal connection between 12 the injury and the conduct complained of.” See Lujan, 504 U.S. at 555 (internal quotation 13 and citation omitted). Additionally, to establish standing under § 17200, a plaintiff must 14 allege it has “lost money or property as a result of the [alleged] unfair competition,” see 15 Law Offices of Mathew Higbee v. Expungement Assistance Services (“Higbee”), 214 Cal. 16 App. 4th 544, 547 (2013), for example, “losses in revenue and asset value” or being 17 “required to pay increased advertising costs,” see id. at 564. Here, although RAPC 18 alleges it has lost customers and has been required to lower its prices (see SAC ¶ 56), as 19 well as its having lost “asset value” in the form of decreased market share (see SAC 20 ¶ 58), RAPC fails to allege any facts to support a finding that such asserted losses 21 occurred as a result of TTC’s submission of fraudulent specimens to the USPTO. 22 Second, as RAPC acknowledges in the SAC (see SAC ¶ 32 and n.3), “[f]raud in 23 procuring a trademark registration occurs when an applicant knowingly makes false, 24 material representations of fact in connection with its application with intent to deceive the 25 USPTO.” See Nationstar Mortgage LLC v. Ahmad, 112 U.S.P.Q. 2d 1361, 1366 26 (T.T.A.B. 2014); see also id. at 1363 (considering whether applicant submitted “fabricated 27 specimen . . . thereby knowingly [making] false statements as to the use of his mark”). 28 Consequently, a § 17200 claim based on the submission of “fraudulent specimens” is 11 1 subject to Rule 9(b), and RAPC has not complied with Rule 9(b), as the SAC includes no 2 facts setting forth the “what, when, where, and how” of the alleged fraudulent 3 submissions by TTC. See Vess, 317 F.3d at 1106 (holding “when averments of fraud are 4 made,” claim is subject to Rule 9(b).) 5 6 Accordingly, to the extent RAPC’s § 17200 claim is based on TTC’s submission of fraudulent specimens to the USPTO, the claim is subject to dismissal. 2. Unauthorized Practice of Law 7 8 United States District Court Northern District of California 9 The TTC Defendants argue that, for a number of reasons, RAPC’s claim that TTC has engaged in the unauthorized practice of law is subject to dismissal. As set forth 10 below, with the exception of the scope of relief to which RAPC may be entitled, the Court 11 disagrees. 12 At the outset, the TTC Defendants argue RAPC lacks standing to assert such 13 claim. Where a law firm asserts against a non-lawyer competitor a § 17200 claim based 14 on the alleged unauthorized practice of law, the plaintiff has standing if it “suffered losses 15 in revenue and asset value and was required to pay increased advertising costs 16 specifically because of the [alleged unauthorized practice of law].” See Higbee, 214 Cal. 17 App. 4th at 564. Here, contrary to the TTC Defendants’ argument, RAPC has alleged 18 such losses (see SAC ¶¶ 56-59), as well as facts to support a finding that such losses 19 were the result of the alleged unauthorized practice of law (see SAC ¶¶ 56, 57, 60). 20 Next, contrary to the TTC Defendants’ argument, a § 17200 claim can be based 21 on the alleged unauthorized practice of law and can be based on harm to RAPC rather 22 than to the market in which RAPC and TTC compete. See Higbee, 214 Cal. App. 4th at 23 554-55 (rejecting argument that “the alleged violation of statutes concerning the 24 unauthorized practice of law cannot serve as a predicate for [a § 17200] action” brought 25 by an attorney, albeit acknowledging “the purpose of the proscriptions against the 26 unlicensed practice of law” is “to protect the public from representation by persons 27 unqualified to practice law” and “not to protect lawyers from competition”). 28 Third, contrary to the TTC Defendants’ argument, Rule 9(b) does not apply to 12 1 RAPC’s claim of unauthorized practice of law, as RAPC, in alleging said claim, does not 2 “specifically alleg[e] fraud” or “facts that necessarily constitute fraud.” See Vess, 317 3 F.3d at 1105 (setting forth circumstances under which claim is subject to Rule 9(b).) 4 Although, as the TTC Defendants observe, RAPC does allege that TTC has made “false 5 and misleading promotional statements [that] deceive consumers into purchasing inferior 6 services” (see SAC ¶ 53), the allegedly false and misleading statements do not pertain to 7 the practice of law (see SAC ¶ 68). RAPC does not allege, for example, that TTC has 8 falsely told its customers it has the ability to practice law or that it does not practice law 9 when in fact it does. United States District Court Northern District of California 10 Fourth, the TTC Defendants contend the facts alleged in the SAC are insufficient 11 to support a finding that TTC has engaged in the unauthorized practice of law. The Court 12 disagrees. Under California law, the practice of law “includes legal advice and counsel 13 and the preparation of legal instruments and contracts by which legal rights are secured 14 although such matter may or may not be depending in a court.” See Baron v. City of Los 15 Angeles, 2 Cal. 3d 535, 542 (1970) (internal alteration omitted). Here, RAPC alleges that 16 TTC’s “non-lawyer staff,” when “creat[ing] and review[ing] [a] trademark application,” 17 make “legal determinations about classification” and “recommend[ ] changes to 18 classifications and goods and services descriptions” (see SAC ¶ 26), and that they 19 “prepare pre-filing searches for clients on potentially conflicting marks” and “file the 20 trademark application after reviewing that there are no conflicting marks” (see SAC 21 ¶ 28.b-c). “In close cases, the courts have determined that the resolution of legal 22 questions for another by advice and action is practicing law if difficult or doubtful legal 23 questions are involved which, to safeguard the public, reasonably demand the application 24 of a trained legal mind.” Id. at 543 (internal quotation and citation omitted). In light 25 thereof, the Court declines to find at the pleading stage that the alleged acts by TTC’s 26 non-lawyer staff do not, as a matter of law, constitute “difficult or doubtful legal issues,” 27 see id., particularly given the USPTO’s stated position, as set forth on its website, 28 regarding what actions taken in connection with the submission of a trademark 13 1 application constitute the practice of law.9 Fifth, the TTC Defendants have failed to show the doctrine of primary jurisdiction United States District Court Northern District of California 2 3 bars the claim, such that the USPTO should initially decide if TTC’s actions constitute the 4 practice of law. Under both federal and state law, “courts may, under appropriate 5 circumstances, determine that the initial decisionmaking responsibility should be 6 performed by the relevant agency rather than the courts.” See Syntek Semiconductor 7 Co. v. Microchip Technology Inc., 307 F.3d 775, 780-81 (9th Cir. 2002) (holding doctrine 8 of primary jurisdiction may be applied where there is “need to resolve an issue” that “has 9 been placed by Congress within the jurisdiction of an administrative body”); see also 10 Cundiff v. GTE California Inc., 101 Cal. App. 4th 1395, 1412 (2002) (noting “specialized 11 knowledge of the relevant agency” and need for “uniformity of application of 12 administrative regulation”). Here, although the USPTO, as set forth above, has identified 13 on its website conduct that, in its view, constitutes the unauthorized practice of law, the 14 USPTO has made clear its position that “Congress has not authorized [it] to regulate 15 entities such as TTC.” (See USPTO’s Mot. to Dismiss, filed June 15, 2018, at 7:24-25.) 16 Under such circumstances, dismissal under the doctrine of primary jurisdiction is 17 unwarranted. 18 // 19 20 21 22 23 24 25 26 27 28 On a webpage titled “Warning about unauthorized practice of law,” the USPTO states that “non-attorneys” cannot perform the following acts: “[c]onsulting with or giving advice to an applicant or registrant in contemplation of filing a trademark application or application-related document” or “[p]reparing or prosecuting an application.” (See SAC ¶ 27.a-b (quoting USPTO webpage at https://www.uspto.gov/trademark/trademarkupdates-and-announcements/warning-unauthorized-lawpractice).) On a separate webpage in which the USPTO states it “cannot give legal advice,” it identifies the following acts, inter alia, that constitute “legal advice”: “[c]onducting pre-filing searches for potentially conflicting trademarks,” “[a]nalyzing or pre-approving documents before filing,” and “[a]dvising applicants on substantive examination issues, such as the acceptability of . . . classification of goods and services.” (See SAC ¶ 27.d-f) (quoting USPTO webpage at https://www.uspto.gov/learning-and-resources/support-centers/ trademark-assistance-center)); see also People v. Landlords Professional Services, 215 Cal. App. 3d 1599, 1608 (1989) (holding non-lawyers’ assisting clients in completing legal forms does “not amount to the practice of law as long as the service offered by [the nonlawyer] [is] merely clerical”). 9 14 United States District Court Northern District of California 1 Lastly, the TTC Defendants argue that, although RAPC alleges it is entitled to 2 restitution (see SAC, Req. for Relief, ¶ 3), RAPC has failed to allege any facts to support 3 a finding that it is entitled to restitution. “[A]n order for restitution is one compelling a 4 [§ 17200] defendant to return money obtained through an unfair business practice to 5 those persons in interest from whom the property was taken, that is, to persons who had 6 an ownership interest in the property or those claiming through that person.” Korea 7 Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1149 (2003) (internal quotation 8 and citation omitted). Here, RAPC fails to plead any facts to support a finding that TTC, 9 by reason of its having allegedly engaged in the unauthorized practice of law, obtained 10 from RAPC any property in which RAPC had an ownership interest. Consequently, to the 11 extent RAPC seeks relief under § 17200 for TTC’s alleged unauthorized practice of law, 12 RAPC is limited to seeking an injunction. See ABC Int’l Traders, Inc. v. Matsushita 13 Electric Corp., 14 Cal. 4th 1247, 1268 (1997) (holding only possible remedies available to 14 plaintiff who prevails on § 17200 claim are injunctive relief and restitution). 15 In sum, to the extent RAPC’s § 17200 claim is based on TTC’s allegedly having 16 engaged in the unlawful practice of law, the claim is not subject to dismissal, but the sole 17 remedy that may be sought is injunctive relief. 18 19 b. Liability of Swyers RAPC alleges Swyers has violated § 17200 by submitting to the USPTO 20 “fraudulent specimens” (see SAC ¶¶ 32, 77.a-b; see also SAC ¶ 74.b), and by engaging 21 in the “unauthorized practice of law” (see SAC ¶¶ 74, 77.a, 77.c). 22 To the extent the claim is based on the submission of fraudulent specimens, the 23 claim is subject to dismissal for the reasons stated above with respect to RAPC’s 24 § 17200 claim against TTC. To the extent the claim is based on the unauthorized 25 practice of law, the claim is also subject to dismissal, in that RAPC’s conclusory 26 allegation that Swyers engaged in such practice as an “accomplice to” and by “aid[ing] 27 and abett[ing]” TTC (see SAC ¶ 30; see also SAC 44.b), is not supported by any factual 28 allegations. See Twombly, 550 U.S. at 555 (requiring more than “labels and conclusions” 15 1 2 3 to survive motion to dismiss).10 Accordingly, to the extent RAPC’s § 17200 claim is alleged against Swyers, the claim is subject to dismissal. c. Liability of Trademark Defendants 4 5 RAPC alleges the Trademark Defendants have violated § 17200 by submitting to 6 the USPTO “fraudulent specimens” (see SAC ¶¶ 32, 77.a-b; see also SAC ¶ 76.a), and 7 by engaging in the “unauthorized practice of law” (see SAC ¶¶ 7, 77.a-b; see also SAC 8 ¶ 76.b). United States District Court Northern District of California 9 The Trademark Defendants argue RAPC has failed to allege sufficient facts to 10 support a finding that personal jurisdiction over either of them exists in the Northern 11 District of California. 12 In that regard, RAPC alleges that the Court has “specific personal jurisdiction over 13 [the Trademark Defendants] because they have minimum contacts with California.” (See 14 SAC ¶ 20). The alleged “minimum contacts” consist of Trademark PLLC’s having 15 “numerous California customers in trademark filing matters” (see SAC ¶ 21), Trademark 16 LLC’s having “hundreds of California customers in trademark filing matters” (see SAC 17 ¶ 22), and both Trademark PLLC and Trademark LLC’s having “directed their 18 advertisements and promotions at consumers in California (see SAC ¶ 23). 19 A court has "specific jurisdiction" over a defendant if “(1) the defendant has 20 performed some act or consummated some transaction within the forum or otherwise 21 purposefully availed himself of the privileges of conducting activities in the forum, (2) the 22 23 24 25 26 27 28 10 RAPC does allege that the USPTO filed against Swyers a complaint in which it stated he engaged in the unauthorized practice of law by, inter alia, allowing non-lawyers to sign his name on trademark applications. (See SAC ¶¶ 34, 40-43.) The SAC does not include, however, any facts to support a finding that Sywers did engage in such conduct, and the USPTO’s complaint was resolved without a determination on its merits. (See SAC ¶¶ 34.j-38.) Further, although RAPC alleges Swyers “fails to maintain an IOLTA account for customers of TTC” and “fails to conduct conflict checks” (see SAC ¶ 44.c), such allegations do not support a finding that Swyers engaged in the unauthorized practice of law, but only, at best, that he failed to comply with certain rules of professional conduct. 16 United States District Court Northern District of California 1 claim arises out of or results from the defendant's forum-related activities, and (3) the 2 exercise of jurisdiction is reasonable.” See Bancroft & Masters, Inc. v. Augusta Nat'l Inc., 3 223 F.3d 1082, 1086 (9th Cir. 2000). Here, the Trademark Defendants argue, RAPC has 4 failed to allege any facts to support a finding that its § 17200 claim arises out of or 5 resulted from the California-related activities identified in the SAC. The Court agrees. 6 First, RAPC fails to allege any facts to show that either of the Trademark 7 Defendants submitted to the USPTO a fraudulent specimen on behalf of any California 8 customer or in a manner that otherwise arose out of or resulted from any of their alleged 9 California-related activities. Second, RAPC fails to allege that either of the Trademark 10 Defendants has engaged in the unlawful practice of law in California or on behalf of any 11 California customer. Lastly, the § 17200 claim is not based on any advertisement or 12 promotion by either of the Trademark Defendants, let alone an advertisement or 13 promotion directed at consumers in California. In sum, RAPC has failed to allege 14 sufficient facts to support a finding that its § 17200 claim “arises out of or results from” the 15 alleged “forum-related activities” of the Trademark Defendants. See id.11 16 17 Accordingly, to the extent RAPC’s § 17200 claim is alleged against the Trademark Defendants, the claim is subject to dismissal. 18 2. Declaratory Judgment 19 In its First Cause of Action, which, as noted, is asserted against TTC only, RAPC 20 alleges it is entitled to a declaration “as to whether TTC is engaged in the unauthorized 21 22 23 24 25 26 27 28 11 Trademark LLC also argues it has no contacts in California, relying on a declaration from its “controlling member,” who states that Trademark LLC “is only a holding company and has never assisted customers with anything, including filing trademark applications, in California or anywhere else.” (See Swyers Decl. ¶ 1, 6, 10.) In response, RAPC relies on “Annual Reports” submitted by Trademark LLC to the State of North Carolina in the years 2012 through and including 2017, in which, under the heading “Description of Nature of Business,” Trademark LLC listed, “Federal Copyright and Trademark Protection Services.” (See SAC Ex. 22.) In light of the above finding, however, the Court need not determine whether RAPC’s evidence suffices as a “prima facie showing of jurisdictional facts” as to the nature of Trademark LLC’s business activities, see Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1285 (9th Cir. 1977), or whether RAPC is entitled to discovery as to that issue, see id. at 1285 n.1. 17 1 United States District Court Northern District of California 2 practice of law.” (See SAC ¶ 65.) By order filed July 17, 2018, the Court dismissed RAPC’s claim for declaratory 3 judgment against another defendant, as alleged in the First Amended Complaint (“FAC”), 4 finding a claim for declaratory judgment seeking no more than a declaration of a 5 defendant’s liability for another existing cause of action is “‘merely duplicative’” and, as 6 such, “‘properly dismissed.’” (See Order, filed July 17, 2018, at 17:16-19 (quoting Swartz 7 v. KPMG LLP, 476 F.3d 756, 765-66 (9th Cir. 2007).) Here, as noted, RAPC bases its 8 § 17200 claim on TTC’s having allegedly engaged in the unauthorized practice of law. 9 Consequently, as the First Cause of Action does no more than seek a finding that RAPC 10 has engaged in an act that violates § 17200, it constitutes a duplicative claim. See 11 Swartz, 476 F.3d at 765-66. 12 13 14 15 16 Accordingly, the First Cause of Action is subject to dismissal. C. Leave to Amend Defendants argue in their respective motions that RAPC should not be afforded further leave to amend. Although the Court, by order filed July 17, 2018, dismissed with leave to amend 17 the claims alleged in the FAC, none of the deficiencies identified above, with the 18 exception of the deficiency in the First Claim for Relief, were the subject of the prior 19 order, and it is not clear that at least some of the newly identified deficiencies could not 20 be cured by further amendment. 21 22 23 24 Accordingly, the Court will afford RAPC leave to amend to cure the deficiencies identified herein with respect to the Second and Third Claims for Relief. CONCLUSION For the reasons stated above, the TTC Defendants’ motion to dismiss is hereby 25 GRANTED in part and DENIED in part, and the Trademark Defendants’ motion to 26 dismiss is hereby GRANTED, as follows: 27 1. The First Claim for Relief is hereby DISMISSED without leave to amend; 28 2. The Second Claim for Relief, to the extent based on “Created by the Top 18 1 Trademark Law Firm in the United States” and “As Featured in,” is hereby DISMISSED 2 with leave to amend; in all other respects, the Second Claim for Relief is not subject to 3 dismissal. 4 5 exception of RAPC’s claim for injunctive relief based on the alleged unauthorized practice 6 of law by TTC, which claim is not subject to dismissal. 7 United States District Court Northern District of California 3. The Third Claim for Relief is hereby DISMISSED with leave to amend, with the 4. RAPC is hereby afforded leave to amend solely as to the Second and Third 8 Claims for Relief and solely to cure the deficiencies in those two claims as identified 9 above. Any Third Amended Complaint shall be filed no later than October 31, 2018. If 10 RAPC does not file a Third Amended Complaint by the deadline set herein, the instant 11 action will proceed on the remaining claims in the SAC. 12 IT IS SO ORDERED. 13 14 Dated: October 12, 2018 MAXINE M. CHESNEY United States District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19
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