Court: District Court, S.D. California; April 25, 2014; Federal District Court
The Court issued an order granting Defendant Macy’s, Inc.'s request for judicial notice and partially granting and partially denying Macy’s motion to dismiss the plaintiffs’ complaint under Federal Rule of Civil Procedure 12(b)(6). The order indicates that Macy’s motion to dismiss was considered without oral argument, following the parties' submissions. The Court incorporated the factual and procedural background from a prior ruling regarding a related motion.
Macy’s request for judicial notice included thirteen documents: eleven previously acknowledged by the Court and two additional documents related to the State Bar of California and California Secretary of State. The Court confirmed these documents are public records whose accuracy is undisputed, thus granting the request for judicial notice but clarifying that it does not acknowledge the truth of the facts within those documents.
Federal Rule of Civil Procedure 12(b)(6) allows a party to move to dismiss a complaint that fails to state a claim for which relief can be granted. The court assesses whether the complaint presents a legal theory and sufficient factual basis under Rule 8(a), which requires a clear statement of the claim. While detailed factual allegations are not mandated, mere accusations without supporting facts are inadequate. A complaint must provide enough factual matter, accepted as true, to suggest a plausible claim for relief, meaning it must allow the court to reasonably infer that the defendant is liable for the alleged misconduct. Claims that merely suggest a possibility of liability, without more, do not meet this standard. Legal conclusions within the complaint are not assumed to be true. The evaluation involves context-specific analysis, relying on judicial experience and common sense. If a motion to dismiss is granted, the court typically allows the plaintiff to amend the complaint unless it is determined that no additional facts could remedy the deficiencies identified.
Plaintiffs assert seventeen claims against multiple defendants, including breaches of contract with Macy’s and others, intentional and negligent misrepresentation, conversion, trademark infringement, false designation of origin, trademark dilution, unfair competition, misappropriation of ideas, interference with contractual relations and prospective economic advantage, and declaratory relief. Macy's challenges the sufficiency of the breach of contract claim, arguing that Promark fails to allege all required elements under California law, including the existence of a contract, performance by plaintiffs, breach by defendant, and resultant damages. Macy's concedes the existence of a contract but contends that Promark was not a party to it, citing the Ravet Declaration. The Court clarifies that while it can notice the existence of the declaration, it cannot accept disputed facts within it. Ultimately, the Court finds that Promark sufficiently alleges the existence of a contract, performance, and breach by Macy’s, thus denying Macy’s motion to dismiss this particular claim.
Claim 4 for intentional misrepresentation requires five elements: 1) a misrepresentation (false statement, concealment, or nondisclosure); 2) knowledge of its falsity (scienter); 3) intent to defraud or induce reliance; 4) justifiable reliance; and 5) resulting damage. Heightened pleading standards under Federal Rule of Civil Procedure 9(b) apply, necessitating specific details about the misrepresentation, the identity of the perpetrator, and the context of the fraud. General allegations of malice or intent are permissible, but claims involving multiple defendants must specify each defendant's involvement. Simply attributing fraud to a corporate entity is insufficient; a specific individual must be named.
Macy’s contends that the Plaintiffs' claim lacks the required specificity regarding the false representations, intent to induce reliance, and damage. In contrast, Plaintiffs assert that their complaint adequately details Macy’s misrepresentations, including statements about sponsorship approval, payment processing, and intentions for a multi-year arrangement. They assert Macy’s knew these statements were false and intended to defraud. Plaintiffs also claim justifiable reliance based on Macy’s requests for a Purchase Order and assurances of payment, leading to resulting damages from Macy’s failure to fulfill sponsorship payments, which forced the suspension of their Tour.
The Court finds that the allegations sufficiently notify Macy’s of the claims against them and establish a prima facie case for intentional misrepresentation, thus denying Macy’s motion to dismiss (MTD) on this claim.
To establish a claim for negligent misrepresentation, a plaintiff must demonstrate five elements: 1) misrepresentation of a past or present material fact, 2) lack of reasonable grounds for believing the fact to be true, 3) intent to induce reliance on the misrepresented fact, 4) justifiable reliance by the plaintiff, and 5) resulting damages. In California, a duty of care must also exist to support such a claim. Macy's argued against this claim similarly to its arguments for the intentional misrepresentation claim. The Court found that the plaintiffs adequately pleaded the elements of negligent misrepresentation, particularly noting that Macy’s agents lacked reasonable grounds for their statements. However, the Court agreed with Macy's that the complaint did not sufficiently allege a duty of care owed by Macy's to the plaintiffs. Consequently, the Court granted Macy's motion to dismiss (MTD) this claim, but did so without prejudice since a duty of care may arise from a contract, statute, or agreement, indicating potential for the plaintiffs to amend their claim accordingly.
Macy’s challenges the Plaintiffs' conversion claim, arguing it fails because Plaintiffs voluntarily transferred the CCT Assets to LEC and did not allege Macy’s took ownership through wrongful means. Macy’s asserts its status as an "innocent receiver" exempts it from conversion liability. In response, Plaintiffs contend that conversion applies not only to theft but also to wrongful use of property. The Court agrees with Plaintiffs, outlining the conversion claim elements: ownership or right to possession, wrongful property disposition, and damages. The Restatement (Second) of Torts § 229 establishes that someone receiving possession with intent to acquire an interest, which the transferor cannot convey, may be liable for conversion.
Plaintiffs assert their ownership of the GACT copyright, trademark, and content, claiming they had a right to immediate possession of the CCT Assets after requesting their return from LEC. They allege Macy’s created and used a “Macy’s GACT” logo without permission and released copyrighted material verbatim, further indicating Macy’s has publicly broadcast GACT footage as its own. Despite LEC's possession, it lacked authority to transfer the assets, and Macy’s purported intent to claim the footage as its own constitutes wrongful use. Macy’s additionally argues that Plaintiffs improperly seek compensatory damages instead of those required by California Civil Code § 3336. However, Plaintiffs have adequately claimed damages due to their loss of the CCT Assets and their inability to distribute GACT. The Court finds that Plaintiffs have established a prima facie case for conversion, denying Macy’s motion to dismiss the claim.
To establish a federal trademark infringement claim under the Lanham Act, a plaintiff must demonstrate a protectible ownership interest in the mark and that the defendant’s use is likely to cause consumer confusion. A claim for false designation of origin follows the same criteria, though registration of the mark is not required. The Court analyzes these claims together. Macy’s contends that public records show only CCT owns the GACT trademark; however, these records are from 2011 to 2012, leaving open the possibility that CCT assigned the mark to Promark thereafter. Consequently, the Court declines to dismiss the trademark claims against Promark, as plaintiffs assert ownership over both CCT and Promark.
Regarding the likelihood of confusion, Macy’s argues that plaintiffs did not adequately allege Macy’s unauthorized use of CCT’s trademark or a similar mark in commerce. The Court disagrees, noting that while likelihood of confusion can sometimes be determined as a matter of law, it is typically a factual issue better suited for jury determination. Plaintiffs claim that Defendants have used their registered mark in connection with a television show and assert that Macy’s created and used the "Macy’s GACT" logo without permission. Given the similarities of the goods and the nature of the allegations, the Court finds that confusion is likely. Thus, the Court denies Macy’s motion to dismiss concerning the claims of federal trademark infringement and false designation of origin.
To establish a federal trademark dilution claim, a plaintiff must demonstrate ownership of a famous and distinctive trademark, the defendant's use of the mark occurred after it gained fame, and that such use is likely to cause dilution through blurring or tarnishment, as defined in Visa Int’l Serv. Ass’n v. JSL Corp. The parties dispute whether the plaintiffs have adequately alleged the fame of their mark. A trademark is considered famous if it is widely recognized by the general public in the U.S. The court evaluates fame based on factors such as advertising reach, sales volume, recognition, and registration status.
Macy’s contends that the plaintiffs have not shown significant public recognition of the GACT mark, citing limited exposure in 2011 and at a niche industry event. In contrast, the plaintiffs argue that Macy’s claims pertain to the case's merits rather than the complaint's sufficiency. However, the court sides with Macy’s, acknowledging the GACT mark's federal registration but noting a lack of allegations regarding advertising efforts, sales, or broad public recognition. The plaintiffs reference some recognition in the entertainment industry, yet this is insufficient to establish wide fame, indicating that their mark may only be recognized within a narrow niche. Consequently, the court finds the plaintiffs' allegations of fame to be deficient, leading to the granting of Macy's motion to dismiss without prejudice regarding this claim.
Claim 10 addresses common law unfair competition, defined primarily as the act of "passing off" one's goods as those of another or selling confusingly similar products that exploit a competitor's reputation. This tort serves as an equitable remedy against the misuse of trade names and common law trademarks lacking legal protection. The critical factor for establishing common law unfair competition is whether the defendant's actions are likely to deceive the public regarding the source of goods or services. Macy’s contends that the Plaintiffs' claim should be dismissed because they possess a valid registered trademark. However, courts have allowed for simultaneous claims of trademark infringement and common law unfair competition, indicating that these claims are not mutually exclusive, particularly at the pleading stage. The Ninth Circuit recognizes that state common law claims of unfair competition align closely with claims under the Lanham Act. Consequently, the Court analyzes the Plaintiffs' trademark infringement and unfair competition claims together. The Court concludes that the common law unfair competition claim is not legally precluded and, having previously found plausible allegations of consumer confusion, denies Macy's motion to dismiss this claim.
Claim 11 alleges a violation of California's Unfair Competition Law (UCL), which prohibits unlawful, unfair, or fraudulent business practices. Plaintiffs assert that Macy's actions constitute unlawful business practices that underlie several claims in their complaint. The court agrees, noting that any business activity that violates the law can be deemed unlawful under the UCL. Promoting a television show as one's own qualifies as a business practice, and since the plaintiffs have plausibly alleged legal violations, these can be considered unlawful under the UCL.
The plaintiffs also claim unfair business practices, stating they created a television show that Macy's subsequently aired under a slightly altered name. While Macy's contends that the plaintiffs' characterization of unfairness does not meet UCL standards, the court clarifies that "unfair" under the UCL refers to conduct that threatens antitrust law violations or significantly harms competition. The plaintiffs' allegations relate more to moral unfairness rather than specific antitrust violations, hence failing to meet the UCL's definition of unfair practices.
Additionally, the plaintiffs allege fraudulent business practices due to Macy's confusingly similar show name, potentially misleading chefs, sponsors, and viewers. The court finds that the fraud aspect of the UCL does not require proof of actual deception, only that the public is likely to be deceived. Accepting the plaintiffs’ allegations as true, the court concludes that Macy's actions could mislead the public regarding the show’s ownership. Consequently, the court denies Macy's motion to dismiss (MTD) regarding this claim, finding that the plaintiffs have sufficiently alleged unlawful and fraudulent acts under the UCL.
Claim 12, related to the misappropriation of ideas, is preempted by the Copyright Act of 1976 because the ideas in question are part of a tangible, copyrighted work, specifically the GACT footage. The court applied the preemption test, confirming that the plaintiffs' rights under state law are equivalent to exclusive rights under the Act, as the plaintiffs allege an implied contract to protect their ideas, which falls within the scope of copyright protections. Consequently, the court grants Macy’s motion to dismiss this claim with prejudice.
Claim 13 concerns intentional interference with contractual relations, requiring proof of (1) a valid contract, (2) knowledge of that contract by the defendant, (3) intentional acts to induce a breach, (4) actual breach, and (5) resulting damages. Macy’s contends that the plaintiffs have not provided sufficient details regarding the contracts in question or demonstrated an actual breach and damages, asserting that the airing of the series on PBS negates any claim of damages since PBS typically does not pay for content. Conversely, plaintiffs argue they have adequately pleaded all elements. However, the court finds that the plaintiffs failed to sufficiently plead the third element, specifically the wrongful conduct of Macy’s aimed at inducing breaches of the plaintiffs' contracts.
Macy’s motion to dismiss (MTD) is granted without prejudice regarding the claims of intentional interference with contractual relations and prospective economic advantage. The complaint fails to specify any actions by Macy's that induced third parties, specifically LEC, to breach contracts with the plaintiffs. It does not demonstrate that Macy's caused LEC to retain the CCT Assets, suggesting that LEC's decision was independent. For the claims of intentional and negligent interference with prospective economic advantage, the plaintiffs did not adequately allege the necessary elements, including Macy's intentional acts or a duty of care owed to the plaintiffs. The court emphasizes the need for proof that the economic advantage would have been realized but for Macy's interference, which the plaintiffs have not established. Thus, both claims are dismissed.
Macy’s motion to dismiss Claim 15 for negligent interference with contractual relations is granted with prejudice, as California law does not recognize this tort. The court cites Fifield Manor v. Finston, reaffirming that California courts consistently refuse to acknowledge claims based on negligent interference, viewing it as an unwarranted extension of negligence liability. Additionally, the court grants Macy’s motion to dismiss claims 12 and 15 with prejudice, indicating that further amendments would be futile, while allowing other claims to proceed without prejudice. Plaintiffs may file an amended complaint within 14 days, or risk dismissal of their claims against Macy’s with prejudice. The court also notes that it will consider the Purchase Order attached to the Complaint as part of its ruling and clarifies that the tort of conversion in California does not require that intangible property rights be represented in a document. The court emphasizes that claims for conversion can be applied to various intangible assets, refuting Macy’s arguments against the conversion claim.
