Trafficschool.com.Inc v. Drivers Ed Direct LLC

Filing 222

Opposition to Ex Parte Application by Defendants for Interim Stay of Injunction Pending Hearing on Motion for Stay Pending Appeal filed by Plaintiffs Trafficschool.com.Inc, Drivers Ed Direct LLC (Attachments: # 1 Declaration)(Hamilton, Mina)

Trafficschool.com.Inc v. Drivers Ed Direct LLC

Doc. 222

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DA VID N. MAKOUS (State Bar # 082409) mako u s @lb b s law.co m DANIEL C. DECARLO (State Bar # 160307) d ecarlo @lb b s law.co m MINA I. HAMILTON (State Bar # 213917) h amilt o n @lb b s law.co m LEWIS BRISBOIS BISGAARD & SMITH LLP 221 North Figueroa Street, Suite 1200 Lo s Angeles, California 90012-2601 Telep h o n e: [phone] Facs imile: [phone]

A t t o rn ey s for Plaintiffs TRA FFICSCHOOL.COM , INC. and 8 DRIVERS ED DIRECT, LLC, California companies.
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UNITED STATES DISTRICT COURT
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CENTRA L DISTRICT OF CALIFORNIA
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221 NORTH FIGUEROA STREET, SUITE 1200 LO S ANGELES, CALIFORNIA 90012-2601 T ELEPHO NE [phone]

LEW I S BRISBOIS BISGAARD & SMITH

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TRA FFICSCHOOL.COM , INC., a California corporation; DRIVERS ED DIRECT, LLC, a California limited 14 liab ilit y company,
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Plain t iffs , vs .

EDRIVER, INC.,; ONLINE GURU, INC., FIND MY SPECIALIST, INC., 18 an d SERIOUSNET, INC., California co rp o rat io n s ; RAVI K. LAHOTI, an 19 in d iv id u al; DOES 1 through 10,
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Defen d an t s .

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Cas e No. CV 06-7561 PA (Cwx) Th e Honorable Percy Anderson OPPOSITION TO EX PARTE APPLICATION BY DEFENDANTS FOR INTERIM STAY OF INJ UNCTION PENDING HEARING ON MOTION FOR STAY PENDING APPEAL

[Lo cal Rule 7-19]

OP P O SITIO N TO EX P A RTE AP P L ICA TIO N FOR INTERIM STAY OF INJUNCTION P E N D IN G HEARING O N MOTION FOR STAY P E N D IN G AP P E A L

Dockets.Justia.com

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MEMORANDUM OF POINTS AND AUTHORITIES I. Inappropri atenes s of Ex Parte Application Plain t iffs strongly oppose Defendants' Ex Parte application for an interim stay o f this Court's Final Injunction pending a hearing on their motion for stay pending an ap p eal.1 / Ex parte applications are for extraordinary relief. Mission Power En g in eerin g Co. v. Continental Casualty Co., 883 F. Supp. 488 (C.D. Cal. 1995). There is no legal authority or justification for Defendants' ex parte attempt to circu mv en t the Federal and Local Rules regarding timing for motion practice, in clu d in g motions for a stay of an injunction pending appeal under Rule 62(c). Defen d an t s ' carefully crafted yet self-serving, unsubstantiated, and vague claims of "dramatic loss," "disproportionate hardship," and "catastrophic impact"2 / t o their business because of the injunction do not justify a reversal of the Federal Ru les ' presumption against stays of a final injunction. Under Rule 62(a), a final act io n for an injunction is expressly exempted from an automatic 10-day stay period t h at applies to all judgments, and the injunction is immediately enforceable regardless o f whether an appeal is being pursued by the losing party.

LEW I S BRISBOIS BISGAARD & SMITH

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221 NORTH FIGUEROA STREET, SUITE 1200 LO S ANGELES, CALIFORNIA 90012-2601 T ELEPHO NE [phone]

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It is unclear to Plaintiffs why Defendants did not file an ex parte application t o shorten the time to hear the motion for a stay rather than request as ex parte relief o n ly what they would be afforded after Pl a i n t i ffs had a fair opportunity to be heard 20 u n d er normal motion deadlines. Regardless, Defendants have not met their burden to 21 s h o w why this Court should overturn the status q u o an d g r a n t either ex parte relief or a noticed motion stay of the injunction. Plain t i f f s also object to having to essentially 22 re s p o n d to the merits of a substantial and significant motion for stay in just under t wen t y -fo u r hours because of the improper tactics of the Defendants.
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W h at is significant about Mr. Lahoti's declaration is wh at information he fa i l s to offer the Court while he adamantly claims his business is o n t h e v e r g e of co llap s e: He fails to tell the Court the financial amounts he is losin g or even the p ercen t ag e of sales or advertising revenue he is lo s i n g as compared with pre-injunction act iv it y . He fails t o s a y how much he has cut advertising expenditures or what his ch an g e in "profitability" has been since the Injunction. Most significantly, he fails to say h o w the "loss of h u n d red s of thousands of visitors" compares to how many visitors are s t ill viewing the website after clicking through the splash page (recall, DMV.ORG recei v e d 60 million visitors a year). Finally, his statement that "absent a prompt, stay, we will most likely have to lay o f f o f a significant number of our 19 employees" (emp h as is added) is hardly evidence of irreparable injury.
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OP P O SITIO N TO EX P A RTE AP P L ICA TIO N FOR INTERIM STAY OF INJUNCTION P E N D IN G HEARING O N MOTION FOR STAY P E N D IN G AP P E A L

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M o reo v er ­ and significantly ­ under Rule 62(c), while a district court does h av e the power to suspend or modify an injunction during the pendency of an ap p eal, by its express terms, Rule 62(c) applies only "[w]hile an appeal is pending fro m an interlocutory order or final judgment that grants . . .an injunction." [Emp h as is added.] Defendants have given no notice of appeal as required by Rule 3, Fed .R.A p p .P., and therefore it cannot be said that an appeal is pending in this case. Accordingly, grounds for ex parte relief are non-existence in this situation wh ere the Federal Rules do not favor immediate stays and provide only for motion p ract ice under Rule 62(c) after an appeal has been taken. Plaintiffs should not be fo rced to respond to an improper motion for stay under Rule 62(c) within twentyfo u r hours and Plaintiffs request that the ex parte relief be denied. Plaintiffs are also n o t opposed to the Court summarily denying Defendants' motion to stay without wait in g for an opposition by Plaintiffs. However, should the Court not summarily d en y Defendants' motion to stay, Plaintiffs request a fair opportunity to address Defen d an t s ' arguments in detail in an opposition filed under the time frames given by t h e Local Rules for motion practice. II. Additional Facts and Summary of Analysis of Motion to Stay Factors Defen d an t s ask this Court to grant a stay, which is entirely in the Court's d is cret io n under Rule 62(c), but they do so while in non-compliance with the In ju n ct io n and after having made a significant misrepresentation to the Court. The Co u rt may want to consider the following facts as further support for why Defen d an t s ' requests for stay should be denied: · Not Presently in Compliance with the Injunction: Defendants are

LEW I S BRISBOIS BISGAARD & SMITH

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221 NORTH FIGUEROA STREET, SUITE 1200 LO S ANGELES, CALIFORNIA 90012-2601 T ELEPHO NE [phone]

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s t ill not in compliance with the Final Injunction.3 / While the Injunction is crystal clear, Defendants refuse to make the font size of DMV.ORG on the splash page s maller than the font in the disclaimer, in clear violation of paragraph (f), which Th is and other non-compliance issues will be the subject of a motion by Plain t iffs for contempt in the near future.
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o rd ers that the disclaimer "shall appear in fourteen (14) point font, and shall be in larg er font size than that used in the DMV.ORG logo and the 'continue' button." [See, Hamilton Decl., ¶2, and Ex. A.] · Mi s repres ented that They Would Keep Disclaimers: Defendants

s t at ed to the Court in their Closing Trial Brief the following: "Defendants have no in t en t io n to remove the disclaimers on DMV.ORG ...The Court can accept DMV.ORG's representation, made here and elsewhere, that it will maintain i ts current level of disclaimers .. .Or the Court may also order Online Guru, as man ag er of DMV.ORG to maintain such disclaimers." [Docket #203-2, pg. 24. Emp h as is added.] Despite such representations, Defendants admittedly removed all s u ch disclaimers on their website after putting up the splash page, and only rein s t it u t ed the disclaimers immediately before filing their motion to stay papers. [See, Hamilt o n Decl., ¶3, and Ex. B.] Despite the unequivocal nature of their post trial p ro mis e, Defendants, as is their repeated habit and custom, shifted their position in co n fo rman ce with their interests notwithstanding their promise to the Court. M o reo v er, Defendants, as movants, have a heavy burden of establishing that t h e factors summarily analyzed below weigh in favor of a stay.4 / They have failed to meet that burden as follows: · Defendants are Not Likely to Prevail on Appeal: The Court issued

LEW I S BRISBOIS BISGAARD & SMITH

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221 NORTH FIGUEROA STREET, SUITE 1200 LO S ANGELES, CALIFORNIA 90012-2601 T ELEPHO NE [phone]

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t h e Final Injunction on August 26, 2008, after issuing its Findings of willful false ad v ert is in g against Defendants in June, 2008. Both sides extensively briefed and arg u ed their respective positions on the form of the injunction (while Defendants en jo y ed the benefits of not being enjoined at all during this time). This Court cited

Han d b erry v . Th o mp s o n , 2003 U.S. Dist. LEXIS 5508, No. 96 Civ. 6161, 26 2 003 WL 1797850, at *1 (S.D.N.Y. Apr. 4, 2003), citing Cooper v. Town of East Hamp t o n , 83 F.3d 31, 36 (2d Cir. 1996). See also Juan v. Rowland, 2001 U.S. Dist. 27 LEXIS 3371, No. Civ. H-89-859, 2001 WL 263395 (D. Ct. Feb. 9, 2001); Schwartz v . Dolan, 159 F.R.D. 380, 383 (N.D.N.Y. 1995), vacated in part on other grounds,86 28 F.3d 315 (2d Cir. 1996); Cayuga Indian Nation v. Vill. o f Un i o n Springs, 317 F. Supp. 2d 152, 155 (N.D.N.Y 2004).
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cas e law in support of the form of its Injunction. The other issues of potential appeal cit ed by Defendants are also without merit: (1) this was never a trademark case u n d er 15 U.S.C. §1125(a)(1)(A); (2) standing was extensively briefed and analyzed b y the Court under 9th Circuit law; (3) there was substantial evidence of confusion ev en without the Maronick survey (e.g., admissions of Defendants themselves); and (4) the 9th Circuit has made clear that unclean hands will not prevent an injunction. · Defendants Have Failed to Show Irreparable Injury

Defendants did not put any substantive evidence in their declaration for their mo t io n (or at trial) that they are going out of business because of the Injunction. See, also, ftn. 2, supra. Despite their failure to substantiate any of their claims of in ju ry due to the Injunction, even if Defendants had set forth the specifics of their alleg ed loss of advertising revenue or employees, such loss does not mean that the In ju n ct io n is not warranted because irreparable injury would only exist if the In ju n ct io n would make them incapable of operating a legitimate business. Willful fals e advertising exists in this case and the only thing that Defendants' statements ab o u t the Injunction suggest is that less consumer and public confusion is indeed t akin g place because of the Injunction. A stay of an injunction that is actually remed y in g the problem would be inconsistent with the well-founded reasons set fo rt h by the Court for issuing it in the first place. See, Rodriguez v. DeBuono, 162 F.3d 56, 62 (2d Cir. 1998) (generally, district court's stay of injunction pending ap p eal will be logically inconsistent with court's prior finding of harm in issuing that s ame preliminary injunction). Moreover, it took Defendants a mere day or so to in s t all their splash page. If a highly unlikely reversal on appeal occurs, Defendants can easily go back to their previous ways. · Pl ai nti ffs Will Be Substantially Harmed by the Granting of the Stay Un d er Rule 62(c), the Court, within its discretion, may require "terms for b o n d or other terms that secure the opposing party's rights." Clearly, Plaintiffs will
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LEW I S BRISBOIS BISGAARD & SMITH

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221 NORTH FIGUEROA STREET, SUITE 1200 LO S ANGELES, CALIFORNIA 90012-2601 T ELEPHO NE [phone]

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s u ffer significant harm if Defendants receive another twelve to twenty-four months o f windfall profits through the operation of a grossly misleading website and service. As competitors of Defendants, Plaintiffs have a significant interest in being afforded t h e opportunity to compete on a level playing field. No justification can be articulated fo r permitting wilful false advertisers to extract another two years of profits out of t h e public through deceptive practices while their dubious appeal moves forward. It is readily apparent that not even Defendants believe that their appeal has merit. This lat es t maneuver is nothing but yet another hustle designed by these internet h u cks t ers to squeeze every nickle out of an illegal enterprise. It is important to note that Plaintiffs realized no financial reward for their effo rt s , and were denied their attorneys fees. The only remedy to prevent the unfair co mp et it io n is now the Injunction and the presence of that Injunction is all that is av ailab le to Plaintiffs to assist them with catching up and fairly competing. The Co u rt stated in its Findings: "Moreover, Plaintiffs stand to indirectly gain from a ju d g men t entered against Defendants because fewer consumers might be directed to t raffic schools and driver's education courses advertised on DMV.ORG, and more o f those consumers might use Plaintiff's own traffic school and driver's education co u rs es instead."[Docket # 210, pg. 32.] Any stay would take away this benefit fro m Plaintiffs. · The Granting of the Stay Will Not Serve the Public Interest

LEW I S BRISBOIS BISGAARD & SMITH

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221 NORTH FIGUEROA STREET, SUITE 1200 LO S ANGELES, CALIFORNIA 90012-2601 T ELEPHO NE [phone]

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Defen d an t s have also not met their burden to show how the public interest will be served by a granting of a stay. Indeed, the public is finally being served by t h e issuance of the Injunction. Defendants' claim that measures taken after the Co u rt 's Findings of additional disclaimers have eliminated emails containing "p ers o n al information from visitors." Even if true5 /, the harm to the public was not

A s noted above and admitted to by Defendants, after the Injunction issued, 28 Defen d an t s removed all disclaimers and notices from their webs i t e in c l u d in g the Help Cen t er/ Co n t act Us section.
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s imp ly that they would send personal information in emails. The focus in this case was on harm to the public because of the misleading nature of DMV.ORG's affiliat io n with a state government agency. While emails from the public may have b een evidence of that harm, it was not the harm itself. As argued numerous times b efo re and as the Court acknowledged in its Findings, "the proportion of total v is it o rs who send an email evidencing confusion is immaterial because there is no ev id en ce than an appreciable number of confused visitors bother to send an email." The Court recognized that consumers had to be alerted before entering the DM V.ORG site to prevent confusion from search engine advertising and from t een ag ers who may be looking to find a drivers education course. [See, Docket, # 210, pg. 29.] III. Concl us i on Fo r the reasons stated above, Plaintiffs strongly oppose Defendants' Ex Parte ap p licat io n and request that it be denied in its entirety. Plaintiffs also request that the Co u rt summarily deny Defendants' motion for stay. Should the Court find, however, s u fficien t grounds to hear Defendants' motion for stay, Plaintiffs' request that it be allo wed to file a more substantive Opposition under the Local Rules' time frame.

LEW I S BRISBOIS BISGAARD & SMITH

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221 NORTH FIGUEROA STREET, SUITE 1200 LO S ANGELES, CALIFORNIA 90012-2601 T ELEPHO NE [phone]

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DATED: September 11, 2008

LEWIS BRISBOIS BISGAARD & SMITH LLP By /s/ Mina Hamilton David N. Makous Dan iel C. DeCarlo M in a I. Hamilton A t t o rn ey s for Plaintiffs

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OP P O SITIO N TO EX P A RTE AP P L ICA TIO N FOR INTERIM STAY OF INJUNCTION P E N D IN G HEARING O N MOTION FOR STAY P E N D IN G AP P E A L