SB Diversified Products, Inc. v. Murchison, No. 3:2012cv02328 - Document 15 (S.D. Cal. 2013)
Court Description: ORDER granting 8 Motion to Dismiss for Failure to State a Claim; denying 8 Motion to Dismiss for Lack of Jurisdiction; denying 8 Motion to Dismiss. Dft's motion to dismiss is granted in part and denied in part. Dismissal for improper venue is denied. Dismissal for lack of declaratory judgment jurisdiction is denied. Dismissal for failure to state a claim is granted. Pla is granted leave to file an amended complaint by 8/26/2013. Signed by Judge Irma E. Gonzalez on 7/23/2013. (jah)
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SB Diversified Products, Inc. v. Murchison Doc. 15 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 SOUTHERN DISTRICT OF CALIFORNIA 8 9 SB DIVERSIFIED PRODUCTS, INC., CASE NO. 12-CV-2328-IEG (MDD) ORDER: Plaintiff, 10 1. DENYING DEFENDANT’S MOTION TO DISMISS FOR IMPROPER VENUE; 2. DENYING DEFENDANT’S MOTION TO DISMISS FOR LACK OF DECLARATORY JUDGMENT JURISDICTION; 3. GRANTING DEFENDANT’S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM WITHOUT PREJUDICE; AND 4. 11 GRANTING PLAINTIFF LEAVE TO AMEND. 12 13 vs. 14 15 16 17 18 MICHAEL MURCHINSON, dba THE TRAP MAKER, Defendant. 19 [Doc. No. 8] 20 21 22 Before the Court is Defendant Michael Murchinson’s motion to dismiss 23 Plaintiff SB Diversified Products, Inc.’s complaint on grounds of improper venue, 24 lack of subject matter jurisdiction, and failure to state a claim. [Doc. No. 8.] For the 25 reasons below, the motion is GRANTED IN PART and DENIED IN PART. 26 27 28 BACKGROUND This is a dispute between competitors in the squirrel trap market, arising from Defendant’s allegedly misleading comments emailed and posted online in regard to -1- 12cv2328 Dockets.Justia.com Plaintiff’s “Squirrelinator” trap. [See Doc. No. 1.] Plaintiff is a squirrel trap maker 1 based in based in Vista, California, and has sold the Squirrelinator product since 2 September 2005. [Id.] Defendant is a competing squirrel trap maker and inventor 3 based in Red Bluff, California, who sells and distributes his own “Black Fox” 4 product and owns Unites States Patent No. 7,866,086 (the “‘086 Patent”). [Id.] 5 Around June 2009, Defendant began emailing Plaintiff’s customers and 6 distributors negative commentary in regard to Plaintiff’s Squirrelinator product, e.g., 7 asserting that the Squirrelinator is inferior to the Black Fox and infringes the ‘086 8 Patent, as well as videos purporting to show the Squirrelinator malfunctioning. [See 9 Id. at 3-5.] Defendant also posted similarly disparaging comments in regard to the 10 Squirrelinator on websites including Amazon.com and eBay.com. [Id. at 4-5.] Plaintiff alleges that Defendant’s emailed and online comments and 11 12 statements constitute false advertising and unfair competition under section 43(a) of 13 the Lanham Act, 15 U.S.C. § 1121, unfair competition under California’s Unfair 14 Competition Law (“UCL”), Cal. Business and Professions Code § 17200, and 15 seeking declaratory relief as provided under the Declaratory Judgment Act, 28 16 U.S.C. § 2201. [Id. at 5-7.] By the present motion, Defendant moves to dismiss on 17 grounds of: 18 (A) improper venue; 19 (B) lack of “declaratory judgment jurisdiction”; and 20 (C) failure to state a claim under the Lanham Act or the UCL. 21 [See Doc. No. 8.] DISCUSSION 22 23 24 A. Motion to Dismiss for Improper Venue Defendant contends that the Southern District of California is an improper 25 venue for this action. [See Doc. No. 8 at 1-3.] Under the general venue statute 28 26 U.S.C. 1391(b), case such as this, “wherein jurisdiction is not founded solely on 27 diversity of citizenship,” “may be brought in a judicial district in which a substantial 28 part of the events or omissions giving rise to the claim occurred.” Juniper Networks, -2- 12cv2328 Inc. v. Juniper Media, LLC, 2012 WL 160248, at *5 (N.D. Cal. Jan. 17, 2012) 1 (internal quotation omitted). “[U]nder the Lanham Act, a ‘substantial part’ of the events giving rise to the 2 3 claims occur in any district where consumers are likely to be confused by the 4 accused goods, ‘whether that occurs solely in one district or in many.’” Allstar 5 Marketing Group, LLC v. Your Store Online, LLC, 666 F. Supp. 2d 1109, 1128 6 (C.D. Cal. 2009). “In evaluating venue in cases involving internet [content], . . . 7 courts have looked to whether the defendant could be said to have ‘entered’ the 8 district in a way that would create confusion for plaintiff’s customers.” Adobe 9 Systems Inc. v. Childers, 2011 WL 566812, at *8 n.5 (N.D. Cal. Feb. 14, 2011) 10 (quoting Dakota Beef, LLC v. Pigors, 445 F. Supp. 2d 917, 920 (N. Ill. 2006)). 11 Pertinent “website [content] coupled with even a small number of sales in the district 12 can support a finding that venue is proper.” Id. at *8 n.5; see also Allstar Marketing 13 Group, 666 F. Supp. 2d at 1130 (“‘modest’ amount of sales” within a district “is 14 sufficient to support venue in a particular district.”). Moreover, even without sales 15 in fact occurring, affirmative marketing activity within a district can suffice. See 16 Radical Products, Inc. v. Sundays Dist., 821 F. Supp. 648, 650 (W.D. Wash. 1992) 17 (although no sales occurred in the district, venue proper since defendant mailed 18 advertising brochures into the district.); Sidco Industries, Inc. v. Wimar Tahoe Corp., 19 768 F. Supp. 1343, 1346-1347 (D. Or. 1991) (mailing advertising brochures into the 20 district sufficient to establish venue). Here, it is undisputed that Defendant’s allegedly false online postings and 21 22 emailed statements concerning the accused product reached into the Southern 23 District. [Doc. No. 1 at 4-5.] Moreover, both Defendant’s own product (the Black 24 Fox) and that of Plaintiff (the Squirrelinator) are sold within the Southern District. 25 [Id.] These circumstances suffice to render venue proper in the Souther District. 26 See, e.g., Juniper, 2012 WL 160248, at *5. As such, Defendant’s motion to dismiss 27 for improper venue is DENIED. 28 /// -3- 12cv2328 B. Motion to Dismiss for Lack of Declaratory Judgment Jurisdiction 1 Defendant’s motion to dismiss for a lack of jurisdiction rests on a misnomer: 2 “declaratory judgment jurisdiction.” [See Doc. No. 8 at 3-8.] As discussed below, 3 the Declaratory Judgment Act does not confer jurisdiction; it merely confers 4 remedial discretion. Countrywide Home Loans, Inc. v. Mortgage Guar. Ins. Corp., 5 642 F.3d 849, 852 (9th Cir. 2011). And, here, declining to entertain the remedy of 6 declaratory judgment would be an abuse of discretion. Accordingly, Defendant’s 7 arguments premised on the Declaratory Judgment Act fail to warrant dismissal. 8 9 “Generally, district courts have a virtually unflagging obligation . . . to hear jurisdictionally sufficient claims.” Id. (internal quotation omitted). “The 10 [Declaratory Judgment Act] relaxes this obligation in cases where a party seeks 11 declaratory relief. It provides that ‘any court of the United States, upon the filing of 12 an appropriate pleading, may declare the rights and other legal relations of any 13 interested party seeking such declaration, whether or not further relief is or could be 14 sought.’” Id. (quoting 28 U.S.C. § 2201(a)). In effect, “Congress enlarged the range 15 of remedies available” yet gave “district courts the discretion to decline to exercise 16 the conferred remedial power.” Id. at 852, 853. 17 Courts “have, at times, characterized th[is] discretion . . . as the ability to 18 ‘accept’ or ‘decline’ ‘discretionary’ jurisdiction, or to decide whether to ‘exercise 19 jurisdiction,’ in an action seeking declaratory relief.” Id. (quotations omitted). . 20 “[H]owever, it is imprecise to describe the discretion provided by the [Declaratory 21 Judgment Act] in terms of jurisdiction” because “discretionary jurisdiction language 22 implicitly and inaccurately suggests that the [Declaratory Judgment Act] confers 23 jurisdiction that the federal courts have the discretion to decline.” Id. at 853 24 (internal quotation omitted). To the contrary, the Declaratory Judgment Act “does 25 not confer jurisdiction, and therefore does not afford the opportunity to decline it.” 26 Id. at 853. Rather, “federal courts have discretion under the [Declaratory Judgment 27 Act] only as to whether to award declaratory relief pursuant to the jurisdiction that 28 they must properly derive from the underlying controversy between the litigants.” -4- 12cv2328 Id. (internal quotation omitted). “Put another way, the [Declaratory Judgment Act] 1 gave district courts the discretion to provide a type of relief that was previously 2 unavailable, but did not [alter] the general conditions necessary for federal 3 adjudication (e.g., a federal question or diversity of citizenship).” Id. 4 Plaintiff’s Lanham Act claims plainly establish federal question jurisdiction. 5 See Sign Designs, Inc. v. Johnson United, Inc., 2011 WL 1549396, at *2 (E.D. Cal. 6 April 21, 2011) (“A claim arising under the Lanham Act states a federal question.”) 7 (citing Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996)). As such, 8 Defendant’s jurisdictional arguments are inapt; there is no question as to whether 9 jurisdiction is proper. The only question is whether the Court should decline to 10 exercise its remedial power to award declaratory relief. The Court should not so 11 decline. Where, as here, “the same action contains claims for both monetary and 12 declaratory relief, the district court should not, as a general rule, . . . decline to 13 entertain the claim for declaratory relief.” R.R. Street & Co. Inc. v. Transport Ins. 14 Co., 656 F.3d 966, 976 (9th Cir. 2011) (internal quotation omitted). Unless the 15 monetary claims are dependent on the claim for declaratory relief, “in the sense that 16 [they] could not be litigated in federal court [] if no declaratory claim had been 17 filed,” declining to entertain declaratory relief would constitute an abuse of 18 discretion. United Nat. Ins. Co. v. R&D Latex Corp., 242 F.3d 1102, 1112-1114 19 (9th Cir. 2001). Because Plaintiff’s Lanham Act claims present federal questions 20 and thus could undoubtedly be litigated in federal court regardless of the presence of 21 any claim for declaratory relief, declining to entertain Plaintiff’s claim for 22 declaratory relief would constitute an abuse of discretion. Id. Accordingly, the 23 Court will not exercise its remedial discretion to decline entertaining Plaintiff’s 24 claim for declaratory relief. At bottom, whether construed in terms of jurisdiction or 25 remedial discretion, dismissal premised on the Declaratory Judgment Act is 26 unwarranted and thus DENIED. 27 C. 28 Motion to Dismiss for Failure to State A Claim Defendant contends Plaintiff fails to state a claim under either the Lanham Act -5- 12cv2328 or the UCL. [Doc. No. 8 at 9-14.] Under Federal Rule of Civil Procedure 8(a)(2), “a 1 complaint must contain sufficient factual matter, accepted as true, to state a claim to 2 relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009). 3 “A claim has facial plausibility when the plaintiff pleads factual content that allows 4 the court to draw the reasonable inference that the defendant is liable for the 5 misconduct alleged.” Id. at 678. Motions to dismiss pursuant to Federal Rule of 6 Civil Procedure 12(b)(6) test the sufficiency of this required showing. New Mexico 7 State Investment Council v. Ernst & Young LLP, 641 F.3d 1089, 1094 (9th Cir. 8 2011). 9 “Determining whether a complaint states a plausible claim for relief . . . [is] a 10 context-specific task that requires the reviewing court to draw on its judicial 11 experience and common sense.” Id. at 679. But the plausibility standard “does not 12 require [courts] to flyspeck complaints looking for any gap in the facts.” Lacey v. 13 Maricopa County, 693 F.3d 896, 924 (9th Cir. 2012) (en banc) (citing Iqbal, 556 14 U.S. at 677-78). “‘Specific facts are not necessary.’” Moss v. U.S. Secret Service, 15 572 F.3d 962, 968 (9th Cir. 2009) (quoting Erickson v. Pardus, 551 U.S. 89, 93 16 (2007)); see also Cafasso, U.S. ex rel. v. General Dynamics C4 Systems, Inc., 637 17 F.3d 1047, 1055 (9th Cir. 2011) (plausibility standard does not require “the who, 18 what, when, where, and how of the misconduct alleged.”). Nor is “[t]he standard at 19 this stage . . . that plaintiff’s explanation must be true or even probable.” Starr v. 20 Baca, 652 F.3d 1202, 1216-17 (9th Cir. 2011). “The factual allegations of the 21 complaint need only ‘plausibly suggest an entitlement to relief.’” Id. at 1217 22 (quoting Iqbal, 556 U.S. at 681). 23 1. Lanham Act Claims 24 “Under the Lanham Act, a ‘prima facie case requires a showing that (1) the 25 defendant made a false statement either about the plaintiff’s or its own product; (2) 26 the statement was made in commercial advertisement or promotion; (3) the 27 statement actually deceived or had the tendency to deceive a substantial segment of 28 its audience; (4) the deception is material; (5) the defendant caused its false -6- 12cv2328 statement to enter interstate commerce; and (6) the plaintiff has been or is likely to 1 be injured as a result of the false statement, either by direct diversion of sales from 2 itself to the defendant, or by a lessening of goodwill associated with the plaintiff's 3 product.’” Newcal Industries, Inc. v. Ikon Office Solution, 513 F.3d 1038, 1052 (9th 4 Cir. 2008) (quoting Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829 (9th 5 Cir.2002)). “To constitute commercial advertising or promotion, a statement of fact 6 must be: (1) commercial speech; (2) by the defendant who is in commercial 7 competition with the plaintiff; (3) for the purpose of influencing consumers to buy 8 defendant’s goods or services[; and, though] the representations need not be made in 9 a “classic advertising campaign,” but may consist instead of more informal types of 10 “promotion,” the representations (4) must be disseminated sufficiently to the 11 relevant purchasing public to constitute “advertising” or “promotion” within that 12 industry.’” Id. at 1054. 13 Here, Plaintiff fails to state a claim under the Lanham Act because the alleged 14 statements do not constitute commercial speech. “Although the boundary between 15 commercial and non-commercial speech has yet to be clearly delineated, the core 16 notion of commercial speech is that it does no more than propose a commercial 17 transaction.” Nissan Motor Co. v. Nissan Computer Corp., 378 F.3d 1002, 1017 18 (9th Cir. 2004). “If speech is not ‘purely commercial’—that is, if it does more than 19 propose a commercial transaction—then it is entitled to full First Amendment 20 protection . . . and is, therefore, non-commercial.” Id. As alleged, Defendant’s 21 purported statements criticize Plaintiff’s product but do not propose any commercial 22 transaction. [Doc. No. 1 at 3-5.] As such, these statements do not constitute 23 commercial speech. Nissan, 378 F.3d at 1017 (“Negative commentary about 24 [Plaintiff] does more than propose a commercial transaction and is, therefore, 25 non-commercial.”); see also Bernard v. Donat, 2012 WL 525533 (N.D. Cal. Feb. 16, 26 2012) (rejecting argument that “statements are ‘commercial speech’ simply because 27 they were made on ‘commercial websites’”). Because amendment is not necessarily 28 futile, Plaintiff’s Lanham Act false advertising claims are hereby DISMISSED -7- 12cv2328 WITHOUT PREJUDICE. 1 2. Unfair Competition Law Claims 2 California’s UCL prohibits “any unlawful, unfair or fraudulent business act or 3 practice and unfair, deceptive, untrue or misleading advertising.” Cal. Bus. & 4 Prof.Code § 17200. “In order to assert a claim under the UCL, a person must have 5 “[] suffered injury in fact and has lost money or property as a result of such unfair 6 competition.” Rondberg v. McCoy, 2009 WL 3017611, at *5 (S.D. Cal. Sept. 21, 7 2009) (quoting Cal. Bus. & Prof.Code § § 17204 & 17535)); see also 8 TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 825 n.1 (9th Cir. 2011) 9 (“Plaintiffs filing an unfair competition suit must prove a pecuniary injury and 10 ‘immediate’ causation.”) (citing Hall v. Time Inc., 158 Cal. App. 4th 847 (2008) and 11 In re Tobacco II Cases, 46 Cal. 4th 298 (2009)). Here, Plaintiff fails to allege any 12 facts showing lost money or property as a result of Defendant’s conduct and thus 13 fails to state a claim under the UCL. Rondberg, 2009 WL 3017611, at *5. Because 14 amendment is not necessarily futile, Plaintiff’s UCL claims are DISMISSED 15 WITHOUT PREJUDICE. CONCLUSION 16 17 18 For the foregoing reasons, Defendant’s motion to dismiss is GRANTED IN PART and DENIED IN PART as follows: 19 • Dismissal for improper venue isDENIED; 20 • Dismissal for lack of “declaratory judgment” jurisdiction isDENIED; 21 • Dismissal for failure to state a claim isGRANTED. 22 • 23 24 25 26 Plaintiff is granted leave to file an amended complaint no later than Monday, August 26, 2013. IT IS SO ORDERED. DATED: July 23, 2013 ______________________________ IRMA E. GONZALEZ United States District Judge 27 28 -8- 12cv2328
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