HM Electronics, Inc. v. R.F. Technologies, Inc., No. 3:2012cv02884 - Document 301 (S.D. Cal. 2015)
Court Description: ORDER denying Defendant's 232 Motion for Partial Summary Judgment. Signed by Judge Cynthia Bashant on 4/17/2015. (jah)
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1 2 3 4 5 6 7 8 9 10 11 UNITED STATES DISTRICT COURT 12 SOUTHERN DISTRICT OF CALIFORNIA 13 14 HM ELECTRONICS, INC., a California corporation, 15 Plaintiff, 16 17 18 19 v. Case No. 12-cv-2884 BAS (MDD) ORDER DENYING DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT [ECF 232] R.F. TECHNOLOGIES, INC., an Illinois corporation, Defendant. 20 21 Presently before the Court is Defendant R.F. Technologies, Inc.’s (“RFT”) 22 motion for partial summary judgment. ECF 232. The Court finds this motion 23 suitable for determination on the papers submitted and without oral argument. See 24 Civ. L.R. 7.1(d.1). For the reasons set forth below, the court DENIES Defendant’s 25 motion. ECF 232. 26 27 28 –1– 12-cv-2884 BAS (MDD) 1 I. BACKGROUND 2 HM Electronics (“HME”) is a prominent figure in the Quick Service 3 Restaurant industry. Haas Decl. ¶ 16, ECF 35-2. Among other things, Plaintiff 4 manufactures wireless drive-thru headsets and provides repair services for its 5 products. Id. Defendant repairs and refurbishes drive-thru headsets, including 6 Plaintiff’s. Noorian Decl. ¶¶ 2, 5, ECF 40-1. Defendant is not an authorized seller 7 or repair service for Plaintiff’s headsets. Haas Decl. ¶ 23. 8 After repairing Plaintiff’s headsets, it was Defendant’s practice to dispose of 9 the HME casings and replace them with RFT-branded casings. Haas Decl. ¶ 29. 10 This has purportedly caused customer confusion, which has resulted in customers 11 mistakenly sending their headsets to Defendant for repair instead of Plaintiff. Id. at 12 ¶¶ 30–33. Additionally, Plaintiff states Defendant engages in a “bait and switch” by 13 advertising HME products for sale and shipping customers RFT-manufactured 14 products instead. Id. at ¶ 27. Plaintiff brought this suit against Defendant alleging 15 injury to its trademark. See FAC ¶¶ 8–10, 34, 36–42, ECF 156. 16 II. LEGAL STANDARD 17 Summary judgment is appropriate on “all or any part” of a claim if there is an 18 absence of a genuine issue of material fact and the moving party is entitled to 19 judgment as a matter of law. Fed.R.Civ.P. 56; see also Celotex Corp. v. Catrett, 477 20 U.S. 317, 322 (1986) (“Celotex”). A fact is material when, under the governing 21 substantive law, the fact could affect the outcome of the case. See Anderson v. 22 Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); see also Freeman v. Arpaio, 125 23 F.3d 732, 735 (9th Cir. 1997). A dispute about a material fact is genuine if “the 24 evidence is such that a reasonable jury could return a verdict for the nonmoving 25 party.” Anderson, 477 U.S. at 248. One of the principal purposes of Rule 56 is to 26 dispose of factually unsupported claims or defenses. See Celotex, 477 U.S. at 323– 27 24. 28 The moving party bears the initial burden of establishing the absence of a –2– 12-cv-2884 BAS (MDD) 1 genuine issue of material fact. See Celotex, 477 U.S. at 323. “The burden then 2 shifts to the nonmoving party to establish, beyond the pleadings, that there is a 3 genuine issue for trial.” Miller v. Glenn Miller Prods., Inc., 454 F.3d 975, 987 (9th 4 Cir. 2006) (citing Celotex, 477 U.S. at 324). 5 “[W]hen the non-moving party bears the burden of proving the claim or 6 defense, the moving party can meet its burden by pointing out the absence of 7 evidence from the non-moving party. The moving party need not disprove the other 8 party's case.” Miller, 454 F.3d at 987 (citing Celotex, 477 U.S. at 325). “Thus, 9 ‘[s]ummary judgment for a defendant is appropriate when the plaintiff fails to make 10 a showing sufficient to establish the existence of an element essential to [his] case, 11 and on which [he] will bear the burden of proof at trial.’ ” Miller, 454 F.3d at 987 12 (quoting Cleveland v. Policy Management Sys. Corp., 526 U.S. 795, 805–06 (1999) 13 (internal quotations omitted)). 14 A genuine issue at trial cannot be based on disputes over “irrelevant or 15 unnecessary facts[.]” See T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 16 809 F.2d 626, 630 (9th Cir. 1987). Similarly, “[t]he mere existence of a scintilla of 17 evidence in support of the nonmoving party's position is not sufficient.” Triton 18 Energy Corp. v. Square D. Co., 68 F.3d 1216, 1221 (9th Cir. 1995) (citing 19 Anderson, 477 U.S. at 252).1 The party opposing summary judgment must “by [his 20 or her] own affidavits, or by the ‘depositions, answers to interrogatories, and 21 admissions on file,’ designate ‘specific facts showing that there is a genuine issue 22 for trial.’ ” Celotex, 477 U.S. at 324 (quoting Fed. R. Civ. P 56(e)). That party 23 cannot “rest upon the mere allegations or denials of [his or her] pleadings.” Fed. R. 24 Civ. P. 56(e). When making its determination, the Court must view all inferences drawn 25 26 27 28 1 See also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (if the moving party meets this initial burden, the nonmoving party cannot defeat summary judgment by merely demonstrating “that there is some metaphysical doubt as to the material facts”). –3– 12-cv-2884 BAS (MDD) 1 from the underlying facts in the light most favorable to the nonmoving party. See 2 Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). 3 “Credibility determinations, the weighing of evidence, and the drawing of 4 legitimate inferences from the facts are jury functions, not those of a judge, [when] 5 ruling on a motion for summary judgment.” Anderson, 477 U.S. at 255. 6 III. DISCUSSION 7 A. Plaintiff’s Claim for Intentional Interference with Prospective Economic 8 Advantage 9 Defendant argues Plaintiff’s sixth cause of action for intentional interference 10 with prospective economic advantage should be dismissed because Plaintiff has not 11 identified any economic relationship with a third party with which Defendant 12 interfered. Def.’s Mot. 8–9. 13 Plaintiff must prove “(1) an economic relationship between the plaintiff and 14 some third party, with the probability of future economic benefit to the plaintiff; (2) 15 the defendant's knowledge of the relationship; (3) intentional acts on the part of the 16 defendant designed to disrupt the relationship; (4) actual disruption of the 17 relationship; and (5) economic harm to the plaintiff proximately caused by the acts 18 of the defendant.” CRST Van Expedited, Inc. v. Werner Enters. Inc., 479 F.3d 1099, 19 1107–08 (9th Cir. 2007) (quoting Korea Supply Co. v. Lockheed Martin Corp., 29 20 Cal.4th 1134, 1153 (2003)). The relationship must already exist and may not be 21 speculative. Roth v. Rhodes, 25 Cal. App. 4th 530, 546 (1994). Defendant 22 challenges only on the grounds that no such relationships have been identified. 23 Def.’s Mot. 9:1–16. 24 Plaintiff’s Rule 26(a)(1) initial disclosures listed witness contact information 25 for Dunkin’ Brands, Northshore Management, and McDonald’s, together with the 26 statement that the witnesses possessed information concerning “[Defendant’s] 27 intentional interference with [Plaintiff’s] economic relationships with its customers 28 and prospective customers.” Vanderhoof Decl. Ex.A, 7, 11–12, ECF 232-3. In –4– 12-cv-2884 BAS (MDD) 1 Defendant’s first set of interrogatories, Defendant asked Plaintiff to “IDENTIFY all 2 HM Electronics economic relationships which were interfered or disrupted as a 3 result of any conduct by RF Technologies, its employees or management.” Herrera 4 Decl. Ex. 1, 13, ECF 250-1. Plaintiff provided the names of thirty-one individuals 5 and contact information for twenty-four of them. Id. at 13–14. Plaintiff further 6 provided an email chain in which an HME representative attempted to persuade a 7 Dairy Queen owner that Defendant provided misinformation. Id., Ex. 4 (HME: “I 8 understand that you need to do what you think is right for your company. . . . If you 9 decide to go with the RF tech, we will understand.”). 10 Plaintiff has sufficiently identified third-party relationships with which 11 Defendant possibly interfered. Defendant has not proved entitlement to summary 12 judgment because Plaintiff has provided evidence to support its claim. Def.’s Reply 13 4. Determining whether this evidence meets Plaintiff’s burden is therefore delegated 14 to the fact finder. Anderson, 477 U.S. at 255. Accordingly, Defendant’s motion is 15 DENIED insofar as it relates to Plaintiff’s cause of action for intentional 16 interference with prospective economic advantage. 17 B. Plaintiff’s Prayer for Corrective Advertising Damages 18 “An award of the cost of corrective advertising, like compensatory damage 19 awards in general, is intended to make the plaintiff whole. It does so by allowing 20 the plaintiff to recover the cost of advertising undertaken to restore the value 21 plaintiff's trademark has lost due to defendant's infringement.” Adray v. Adry-Mart, 22 Inc., 76 F.3d 984, 988 (9th Cir. 1995) (citing Zazu Designs v. L’Oreal, S.A., 979 23 F.2d 499, 506 (7th Cir. 1992)). “A plaintiff need not show a specific measure of 24 harm to its goodwill and reputation in order to recover corrective damages.” Quia 25 Corp. v. Mattel, Inc., No. C 10–1902, 2011 WL 2749576, at *4 (N.D. Cal. July 14, 26 2011) (citing Adray, 76 F.3d at 988). “However, compensatory damages are 27 appropriate only where a plaintiff has shown that in fact it has been injured; it still 28 must present non-speculative evidence that goodwill and reputation—that is, the –5– 12-cv-2884 BAS (MDD) 1 value of its mark—was damaged in some way.” Id. (citation omitted). 2 The record contains voluminous evidence of Defendant’s conduct regarding 3 Plaintiff’s products. A fact finder could reasonably find that Plaintiff’s trademark 4 was damaged and that Defendant therefore owes Plaintiff compensatory damages. 5 Defendant argues that Adray, 76 F.3d at 989, requires corrective advertising 6 damages to not exceed the value of the relevant trademark, and since Plaintiff has 7 not introduced any evidence valuing its trademark, Plaintiff cannot recover these 8 damages. Def.’s Mot. 9–12. There are multiple ways to value a trademark. See 9 Kennedy Decl. ¶¶ 16–18, ECF 297. Under the “cost approach” the value of the 10 trademark is the cost of creating or obtaining the trademark, which includes, among 11 other things, marketing and advertising costs. Michael J. Freno, Trademark 12 Valuation: Preserving Brand Equity, 97 Trademark Rep. 1055, 1058 (2007). “In a 13 sense, advertising costs most accurately reflect trademark value: the more one 14 advertises a mark, the more public recognition inures to the mark, which increases 15 its value.” Id. at 1058–59. 16 One of the methods for calculating corrective advertising damages is to 17 award the injured party 25% of the defendant’s relevant advertising costs. See Int’l 18 Oddities v. Record, No. CV 12–3934, 2013 WL 3864050, at *14 (C.D. Cal. 2013); 19 Adray, 76 F.3d at 988. Defendant’s argument overlooks the fact that 25% of its 20 advertising for HME products can never be more than the value of HME’s 21 trademark under the cost approach. Defendant cannot spend more money 22 advertising the HME brand than what Defendant believed the brand to be worth. 23 Plaintiff’s damages expert calculated 25% of Defendant’s advertising 24 expenses to be approximately $960,000. See Kennedy Decl. ¶ 16–17; Pl’s Opp’n 25 15–16. Given that Plaintiff is highly prominent in the QSR industry and has itself 26 invested more than $5 million in advertising over the last several years, 25% of 27 Defendant’s relevant advertising costs appears to be lower than the trademark’s 28 value. See Haas Decl. ¶ 16, ECF 35-2. Since there is at least one viable method for –6– 12-cv-2884 BAS (MDD) 1 determining corrective advertising damages, Plaintiff’s prayer for corrective 2 advertising need not be dismissed at this time. 3 IV. CONCLUSION 4 5 Accordingly, the Court DENIES Defendant’s motion for partial summary judgment. ECF 232. 6 7 IT IS SO ORDERED. 8 9 DATED: April 17, 2015 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 –7– 12-cv-2884 BAS (MDD)
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