LegalZoom.com Inc v. Rocket Lawyer Incorporated

Filing 176

NOTICE OF LODGING Proposed Pretrial Conference Order Plaintiff LegalZoom.com Inc. (Attachments: # 1 Proposed Order Final Pretrial Conference Order, # 2 Exhibit A)(Heather, Fred)

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PATRICIA L. GLASER - State Bar No. 55668
[e-mail]
FRED D. HEATHER - State Bar No. 110650
[e-mail]
AARON P. ALLAN - State Bar No. 144406
[e-mail]
GLASER WEIL FINK HOWARD
AVCHEN & SHAPIRO LLP
10250 Constellation Boulevard, 19th Floor
Los Angeles, California 90067
Telephone: [phone]
Facsimile: [phone]
Attorneys for Plaintiff
LegalZoom.com, Inc.
Forrest A. Hainline III (SBN 64166)
[e-mail]
Hong-An Vu (SBN 266268)
[e-mail]
GOODWIN PROCTER LLP
Three Embarcadero Center, 24th Floor
San Francisco, California 94111-4003
Tel.: [phone]
Fax.: [phone]
Michael T. Jones (SBN 290660)
[e-mail]
GOODWIN PROCTER LLP
135 Commonwealth Drive
Menlo Park, California 94025-1105
Tel.: [phone]
Fax.: [phone]
Attorneys for Defendant
ROCKET LAWYER INCORPORATED

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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WESTERN DIVISION

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LEGALZOOM.COM, INC., a Delaware
corporation,
Plaintiff,
v.
ROCKET LAWYER INCORPORATED,
a Delaware corporation,

CASE NO.: CV 12-9942-GAF (AGRx)
Hon. Gary A. Feess
Courtroom: 740
[PROPOSED] FINAL PRETRIAL
CONFERENCE ORDER

Defendant.

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FINAL PRETRIAL CONFERENCE ORDER
964079.3

Pre-Trial Conference:

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Date:
Time:

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November 10, 2014
3:30 p.m.

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Trial:

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Date:
December 9, 2014
Time:
8:30 a.m.
Courtroom: 740

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Complaint Filed: November 20, 2012

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FINAL PRETRIAL CONFERENCE ORDER
964079.3

Following pretrial proceedings, pursuant to Fed. R. Civ. P. 16 and L.R. 16, IT

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IS ORDERED:

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1.

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The parties are:
 Plaintiff/Counter-Defendant: LEGALZOOM.COM, INC., a Delaware

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corporation (“LegalZoom”).

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 Defendant/Counter-Claimant: ROCKET LAWYER INCORPORATED,

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a Delaware corporation (“Rocket Lawyer”).

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Each of these parties has been served and has appeared. All other parties named

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PARTIES AND PLEADINGS

in the pleadings and not identified in the preceding paragraph are now dismissed.
The pleadings which raise the issues are:

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 LegalZoom’s First Amended Complaint, filed January 7, 2013.

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 Rocket Lawyer’s Answer to First Amended Complaint and Amended
Counterclaims, filed January 23, 2013.

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 LegalZoom’s Answer to Counterclaims of Rocket Lawyer, filed

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February 11, 2013.

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FEDERAL JURISDICTION AND VENUE

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2.

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This action includes claims which arise under the laws of the United States, 15

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U.S.C. §1125 et seq. This Court has original jurisdiction of this action under 15

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U.S.C. § 1338. This Court has supplemental jurisdiction under 28 U.S.C. § 1367

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because the claims are so related as to form part of the same case or controversy.

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This Court has personal jurisdiction over Parties because LegalZoom and

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Rocket Lawyer solicit, transact and do business in California and this District via their

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websites and toll-free telephone numbers, a substantial part of the wrongful acts or

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omissions complained of occurred in this District, and the Parties are subject to

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personal jurisdiction in this District. The parties purposefully directed their activities

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toward this District. Venue is proper in the United States District Court for the

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Central District of California under 28 U.S.C. §§ 1391(b) and (c).
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FINAL PRETRIAL CONFERENCE ORDER
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TRIAL TIME ESTIMATE

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3.

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The Parties estimate that the trial will take 6 trial days.

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4.

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The trial is to be a jury trial.

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Rocket Lawyer’s position:

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Rocket Lawyer contends that each parties’ Business and Professions Code

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section 17200 claims are equitable in nature and should be decided by the judge rather

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than the jury.

JURY/NON-JURY TRIAL

At least seven (7) days prior to the trial date the parties shall lodge and serve by

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e-mail, fax, or personal delivery: (a) proposed jury instructions as required by L.R.

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51-1 and (b) any special questions requested to be asked on voir dire.
ADMITTED FACTS

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5.

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The following facts are admitted and require no proof:

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1. Rocket Lawyer and LegalZoom are competitors in the online legal solutions

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market, which consists of companies offering access to legal forms, subscription

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plans, independent attorney consultation time, and other legal solutions at

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affordable prices.

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2. Rocket Lawyer and LegalZoom each tout the provision of affordable legal
services to individuals, families and business owners.

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3. LegalZoom.com has been in operation since 2000.

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4. RocketLawyer.com has been in operation since fall 2008.

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5. Rocket Lawyer and LegalZoom also compete with many other competitors in the

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legal solutions industry.
6. Both offer incorporation, business formation services, and other online legal
products through their websites.
7. All persons who would like to form a business are required to pay the state fees
associated with incorporation and formation.
8. There are many free trials offered in the internet marketplace, including offers
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FINAL PRETRIAL CONFERENCE ORDER
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from LegalZoom, Microsoft, Amazon, Turbo Tax, Netflix, Sirius XM, and many

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others.

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9. Rocket Lawyer and LegalZoom, like other competitors in this market, advertise

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their services on search engines such as Google and Bing through paid search

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advertising (or search engine marketing), and on their own websites.

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10. Organic search results are free listings on Google or Bing that appear because of
relevance to a user’s search terms.
11. Google and Bing also allow businesses to engage in paid search advertising by

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bidding on terms—“keywords”—that users may enter into the search field.

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12. If the words people type in Google match keywords bid on by a company, that

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company’s ad can appear above or next to the search results.
13. When a user searches for “incorporation,” immediately above or along the side

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of the organic search results are ads for businesses that have bid on that term and

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the organic search results follow.

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14. The more a company is willing to pay for its ad to appear on a search term, the
more likely that company’s ad will appear.
15. The three ads that appear immediately above the organic search results are

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considered to be in better positions than the ads that appear to the right of the

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organic search results.

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16. Google and Bing each allow companies to bid on the brand names of other

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companies in search engine marketing. For example, Starbucks can bid on the

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search term “Pete’s Coffee” so that an ad for Starbucks could appear on a search

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for Pete’s.

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17. A “conversion” is a term used by online companies that helps them understand

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what consumers do after clicking on a company’s ad. A conversion happens

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when someone clicks a company’s ad and then takes an action that the company

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has defined as valuable to its business.

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18. Google and Bing count one “click” each time someone accesses a company’s
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FINAL PRETRIAL CONFERENCE ORDER
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website through the company’s search engine ad.
19. The ”conversion rate” is the number of conversions resulting from each click,

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which is calculated by simply taking the number of conversions and dividing that

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by the number of total ad clicks during the same time period.

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20. At least in 2011, 2012 and 2013, Rocket Lawyer advertised “free” incorporation
and “free” limited liability companies (LLCs).
21. Rocket Lawyer has published a number of “free” advertisements, including “free
help from local attorneys,” “free legal review” on its website.
22. Rocket Lawyer has advertised “Zoom Charges $99. Rocket Lawyer is Fast,

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Easy, & Free. Incorporate your Business Today,” “Incorporate for Free…Pay

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No Fees ($0),” “Incorporate Your Business at Rocket Lawyer Free,” “Form Your

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LLC Free at Rocket Lawyer” and “Free…LLCs” on search engine results pages.

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23. At least in 2012 and 2013, Rocket Lawyer advertised on its website “free” trials

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of its “Basic Legal Plan” and “Pro Legal Plan.”

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24. Travis Giggy is a former employee of LegalZoom.

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25. Travis Giggy is the owner of Own Vision LLC which does business as

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LegalSpring.com.
26. Affiliates are third parties who agree to display links to a company’s website and
receive compensation for the traffic they drive to that company.
27. LegalZoom affiliates typically receive compensation in the form of a percentage

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of initial orders completed by consumers who accessed the company’s website

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through the affiliate’s website.

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28. LegalSpring also has a star rating on a scale of 1 to 5 for LegalZoom and the
other companies listed on its website.
29. A company’s star rating is affected by the number of positive and negative
reviews it has.
30. On Legalspring.com, consumers viewing the reviews can indicate whether they
are “helpful” or not.
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FINAL PRETRIAL CONFERENCE ORDER
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STIPULATED FACTS

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The following facts and issues are stipulated by the parties to be true :

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1. All internet advertisements which are the subject of this action were caused to
enter interstate commerce.

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2. Neither side intends to pursue punitive damages in this lawsuit.

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3. Documents produced in discovery by LegalZoom, Rocket Lawyer, and Travis

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Giggy are presumed to be authentic absent a showing made based on clear and

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convincing evidence.
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CLAIMS AND DEFENSES OF THE PARTIES
LEGALZOOM’S CLAIMS

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Claims and Elements

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A.

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Plaintiff plans to pursue the following claims against Defendant:
Claim 1:

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Federal False Advertising Under the Lanham Act, 15 U.S.C.
§ 1125(a)

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Claim 2:

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California False Advertising Under Cal. Bus. & Prof. Code
§ 17500

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Claim 3:

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California Unfair Competition Under Cal. Bus. & Prof.
Code § 17200 et seq.

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The elements required to establish Plaintiff’s claims are:

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Claim 1:

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U.S.C. § 1125(a):

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1)
2)

the statement actually deceived or has the tendency to deceive a
substantial segment of its audience;

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Rocket Lawyer made a false or misleading statement of fact about its
own product or another’s product in commercial advertising;

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Federal False Advertising Under the Lanham Act, 15

3)

the deception is material, in that it is likely to influence the purchasing
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FINAL PRETRIAL CONFERENCE ORDER

964079.3

decision;

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interstate commerce; and

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Rocket Lawyer caused its false or misleading statement to enter

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LegalZoom has been or is likely to be injured as a result of the false or

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misleading statement, either by direct diversion of sales from itself to

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Rocket Lawyer or by a lessening of the goodwill associated with its

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products.

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Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997);

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Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1054 (9th Cir. 2008); 15

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U.S.C. § 1125(a)(1)(B)

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Claim 2:

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Code § 17500:

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California False Advertising Under Cal. Bus. & Prof.

1)

Rocket Lawyer made or disseminated a statement in connection with the
sale or disposition of goods or services;

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2)

Rocket Lawyer’s statement was untrue or misleading;

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3)

Rocket Lawyer either knew, or which by the exercise of reasonable care
should have known, that its statement was untrue or misleading; and

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4)

Members of the target audience for the statement were likely to be

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deceived.

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See California Business and Professions Code § 17500.

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Claim 3:

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Code § 17200 et seq.

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1)

Rocket Lawyer engaged in a business practice that is forbidden by law;
and

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California Unfair Competition Under Cal. Bus. & Prof.

2)

Rocket Lawyer committed false advertising under the federal Lanham
Act or false advertising under California Business and Professions Code

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FINAL PRETRIAL CONFERENCE ORDER
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§ 17500.

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Gonzalez v. Proctor and Gamble Co., 247 F.R.D. 616, 625 (S.D. Cal. 2007); Korea

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Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1143 (2003); CRST Van

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Expedited, Inc. v. Werner Enter., Inc., 479 F.3d 1099, 1107 (9th Cir. 2007).

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Key Evidence Regarding LegalZoom’s Claims

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B.

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In brief, the key evidence Plaintiff relies on for each of the claims is:
Claim 1:

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U.S.C. § 1125(a):

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Federal False Advertising Under the Lanham Act, 15

1) Rocket Lawyer’s internet advertisements
 which promise “free” incorporation without disclosing within the same

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advertisement the need to pay state filing fees

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 which promise “free” trials without disclosing within the same

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advertisement that a credit card will be charged at the end of the trial

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 which promise “free” legal advice that customers were unable to get
absent some form of payment

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2) Rocket Lawyer’s internal usability studies, including:
 an internal Rocket Lawyer report showing that small business owners

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felt “deceived” by Rocket Lawyer’s “free” advertisements

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 an internal Rocket Lawyer report showing that small business owners

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felt Rocket Lawyer was employing a “bait and switch”

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 an internal Rocket Lawyer report showing that small business owners

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felt the advertisements were “sneaky” which “undermined their trust”

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 notes of study participants and comments of Rocket Lawyer employees

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on such notes which confirm that the advertisements were perceived by

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Rocket Lawyer to be false and misleading

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 videotapes of study participants reacting to the internet advertisements

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 testimony of Rocket Lawyer witnesses, including Charles Moore, and
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FINAL PRETRIAL CONFERENCE ORDER
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Alisa Weiner, confirming that the studies were carefully constructed by

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Rocket Lawyer to evaluate consumer perceptions of the advertisements,

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and were relied upon by Rocket Lawyer in making decisions about how

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to run their advertisements
 Email communications between Rocket Lawyer employees regarding a

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Rocket Lawyer policy to disregard customer feedback and preferences

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because of a concerted effort by the executive team at Rocket Lawyer to

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minimize changes that might negatively impact revenue.

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3) Rocket Lawyer’s usability study performed by Google Ventures which shows

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that users found Rocket Lawyer's "Free" promise misleading and disappointing,

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which undermined the user's trust.

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4) Communications between Google and Rocket Lawyer in which Google stated

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that Rocket Lawyer’s advertisements violate Google's Offer Not Found Policy

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by saying: (1) Incorporate for Free, but failing to disclose state fees, and (2)

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saying "Free Legal Document" but failing to disclose the contingency

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5) Communications in which Google threatened to discontinue running Rocket

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Lawyer advertisements because of the false and misleading nature of those

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advertisements

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6) Communications between LegalZoom’s co-founder, Brian Liu, and Charles

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Moore of Rocket Lawyer concerning the false and misleading nature of Rocket

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Lawyer’s advertisements

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7) Rocket Lawyer’s admission that it changed its advertisements after this lawsuit
was commenced

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8) Survey and market research evidence presented by expert witnesses, Dr. Bruce

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Isaacson and Dr. Larry Chiagouris, which confirms that the Rocket Lawyer

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“free” advertisements were false and misleading to the intended audience, and

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that LegalZoom likely suffered a loss of market share and loss of goodwill as a

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result of Rocket Lawyer’s “free” advertisements
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9) Evidence in the form of spread sheets, summaries, and other documents and

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opinions presented by LegalZoom’s expert Dr. Alan G. Goedde, which show

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the number of clicks on Rocket Lawyer’s “free” advertisements, the

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conversions to purchase, the relative market share, the illicit profits gained by

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Rocket Lawyer and the damages suffered by LegalZoom
Claim 2:

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Code § 17500:

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Same as Claim 1 above.

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Claim 3:

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Same as Claim 1 above.

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ROCKET LAWYER’S AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
Defendant plans to pursue the following counterclaims and affirmative

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California Unfair Competition Under Cal. Bus. & Prof.

Code § 17200 et seq.

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California False Advertising Under Cal. Bus. & Prof.

defenses:
Counterclaims

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 Counterclaim 1: Rocket Lawyer has not violated the Lanham Act.

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 Counterclaim 2: Rocket Lawyer has not violated the FAL.

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 Counterclaim 3: Rocket Lawyer has not violated the UCL.

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 Counterclaim 4: LegalZoom has violated the Lanham Act, 15 U.S.C. § 1125(a).

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 Counterclaim 5: LegalZoom has violated the FAL, Cal. Bus. & Prof.
Code § 17500.

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 Counterclaim 6: LegalZoom has violated the UCL, Cal. Bus. & Prof.

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Code § 17200 et seq.
Affirmative Defenses

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 Affirmative Defense 1: LegalZoom’s claims are barred, in whole or in part, for
want of equity or by the doctrine of unclean hands.

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 Affirmative Defense 2: LegalZoom’s claims are barred, in whole or in part, by
laches, waiver, and/or estoppel.

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 Affirmative Defense 3: Any injury sustained by LegalZoom was caused in

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whole or in part by acts or omissions of persons over whom Rocket Lawyer

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neither exercised nor had any right of control, for whom Rocket Lawyer is and

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was not responsible, and whose conduct Rocket Lawyer had no duty or reason

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to anticipate or control.

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 Affirmative Defense 4: Rocket Lawyer’s practices have not caused any
likelihood of confusion; any likelihood of confusion is caused by LegalZoom.

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C.

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1.

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(1)
(2)
(3)
(4)

any deception is not material, in that it is not likely to influence the
Rocket Lawyer did not cause a false or misleading statement to enter

interstate commerce; OR

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the statement did not actually deceived and has no tendency to deceive a

purchasing decision;

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Rocket Lawyer did not make a false or misleading statement of fact

substantial segment of its audience; OR

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Elements Required to Establish Rocket Lawyer’s
Counterclaim for Declaratory Relief that It Did Not Violate
the Lanham Act

about its own product or another’s product in commercial advertising; OR

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Elements Regarding Rocket Lawyer’s Counterclaims

(5)

LegalZoom has not been and is not likely to be injured as a result of any

false or misleading statement.

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See Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir.

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1997); Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1054 (9th Cir.

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2008); 15 U.S.C. § 1125(a)(1)(B).

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2.

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Elements Required to Establish Rocket Lawyer’s
Counterclaim for Declaratory Relief that It Did Not Violate
the FAL

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Any statement made or disseminated by Rocket Lawyer was either:

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(1) not made in connection with the sale or disposition of goods or services,

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(3) not untrue or misleading, or

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(4) was neither known, nor by the exercise of reasonable care should have been

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known, to be untrue or misleading.

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See California Business and Professions Code § 17500.

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LegalZoom’s Contentions Regarding Elements of Claim:
To establish that the statement made or disseminated was not misleading,

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Rocket Lawyer must demonstrate that members of the target audience for the

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statement were unlikely to be deceived. Colgan v. Leatherman Tool Group, Inc., 38

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Cal. Rptr. 3d 36, 135 Cal. App. 4th 663 (Cal. App. 2006) (citing Freeman v. Time,

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Inc., 68 F.3d 285, 289 (9th Cir. 1995)

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3.

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Elements Required to Establish Rocket Lawyer’s
Counterclaim for Declaratory Relief that It Did Not Violate
the UCL

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(1)

Rocket Lawyer did not engage in a business practice that is forbidden by

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law.

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See Cal. Bus. & Prof. Code § 17200; Rice v. Fox Broad. Co., 330 F.3d 1170,

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1181-82 (9th Cir. 2003) (granting summary judgment to defendants on UCL claim

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based strictly on grant of summary judgment on Lanham Act false advertising claim).

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4.

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(1)

Elements Required to Establish Rocket Lawyer’s
Counterclaim that LegalZoom Violated the Lanham Act

LegalZoom made a false or misleading statement of fact about its own

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product or another’s product in commercial advertising;
(2)

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the statement actually deceived or has the tendency to deceive a

substantial segment of its audience;

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(3)

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decision;

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(4)

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commerce; and

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(5)

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the deception is material, in that it is likely to influence the purchasing
LegalZoom caused its false or misleading statement to enter interstate
Rocket Lawyer has been or is likely to be injured as a result of the false

or misleading statement, either by direct diversion of sales from itself to LegalZoom
or by a lessening of the goodwill associated with its products.
Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997);

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Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1054 (9th Cir. 2008); 15

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U.S.C. § 1125(a)(1)(B).
LegalZoom’s Contentions Regarding Elements of Claim: LegalZoom need

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only defeat one element of Rocket Lawyer’s Lanham Act claim in order to prevail.

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5.

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(1)

and which is known, or which by the exercise of reasonable care should

be known, to be untrue or misleading.

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See California Business and Professions Code § 17500.

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LegalZoom’s Contentions Regarding Elements of Claim:

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which was untrue or misleading,

(4)

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in connection with the sale or disposition of goods or services,

(3)

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LegalZoom made or disseminated a statement,

(2)

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Elements Required to Establish Rocket Lawyer’s
Counterclaim that LegalZoom Violated the FAL

To establish that the statement made or disseminated was misleading, Rocket
Lawyer must demonstrate that members of the target audience for the statement were

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likely to be deceived. Colgan v. Leatherman Tool Group, Inc., 38 Cal. Rptr. 3d 36,

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135 Cal. App. 4th 663 (Cal. App. 2006) (citing Freeman v. Time, Inc., 68 F.3d 285,

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289 (9th Cir. 1995). LegalZoom need only defeat one element of Rocket Lawyer’s

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FAL claim in order to prevail.

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6.

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(1) LegalZoom’s conduct with respect to LegalSpring.com was:

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a. unfair;

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b. fraudulent; or

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c. unlawful based on violation of the Lanham Act or FAL.

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Cal. Bus. & Prof. Code § 17200 et seq.; Kerr Corp. v. Tri Dental, Inc., No.
SACV 12–0891 DOC (CWx), 2013 WL 990532, at *4 (C.D. Cal. Mar. 11, 2013)
(granting default judgment for UCL claim where liability under Lanham Act shown).

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Elements Required to Establish Rocket Lawyer’s
Counterclaim That LegalZoom Violated the UCL

LegalZoom’s Contentions Regarding Elements of Claim: Showing that
conduct is “unfair” is not adequate to establish a violation of the UCL. See, e.g.,
CRST Van Expedited, Inc. v. Werner Enter., Inc., 479 F.3d 1099, 1107 (9th Cir.
2007). LegalZoom need only defeat one element of Rocket Lawyer’s UCL claim in
order to prevail.

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7.

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Elements Required to Establish Rocket Lawyer’s First
Affirmative Defense of Unclean Hands

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(1)

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LegalZoom’s inequitable conduct related directly to the subject matter of

its claims against Rocket Lawyer.
BAJI § 10:3 Special Instruction 4; Brother Records, Inc. v Jardine, 318 F.3d

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LegalZoom engaged in inequitable conduct; and

(2)

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900, 909 (9th Cir. 2003); Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829,
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841 (9th Cir. 2002); Ellenburg v. Brockway, Inc., 763 F.2d 1091, 1097 (9th Cir.

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1985); Pfizer, Inc. v. Int'l Rectifier Corp., 685 F.2d 357, 359 (9th Cir. 1982)

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4

8.

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a.

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that plaintiffs claim was barred by laches); Conti v. Board of Civil Service Comm’rs,
1 Cal. 3d 351, 359 (1969) (“The defense of laches requires unreasonable delay plus
either acquiescence in the act about which plaintiff complains or prejudice to the
defendant resulting from the delay.”).
LegalZoom’s Contentions Regarding Elements of Claim:

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LegalZoom acquiesced in the conduct about which it complains.

Johnson v. City of Loma Linda, 24 Cal. 4th 61, 68 (2000) (affirming finding

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that the delay caused prejudice to Rocket Lawyer, or

(b)

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Either:
(a)

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LegalZoom unreasonably and inexcusably delayed in bringing suit, and

(2)

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Laches:

(1)

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Elements Required to Establish Rocket Lawyer’s Second
Affirmative Defense of Laches, Waiver, and/or Estoppel

Ninth Circuit authority provides that to prevail on a laches defense, the
defendant-party must prove by a preponderance of the evidence that: (1) the plaintiffparty unreasonably delayed in bringing suit; and (2) the delay caused material
prejudice to the defendant-party. Internet Specialties W., Inc. v. Milon-DiGiorgio
Enterprises, 559 F.3d 985, 990 (9th Cir. 2009); Jarrow Formulas, Inc. v. Nutrition
Now, 304 F.3d 829, 838 (9th Cir.2002); Trustees For Alaska Laborers-Constr. Indus.
Health &Sec. Fund v. Ferrell, 812 F.2d 512, 518 (9th Cir. 1987). The period of delay
is measured beginning from the time that the plaintiff-party knew or should have
known of the of the allegedly infringing conduct. Danjaq LLC v. Sony Corp., 263
F.3d 942, 952 (9th Cir. 2001). There is an exceptionally strong presumption that
laches cannot be found when a case is brought within the statute of limitations or

28
14
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1

analogous statute of limitations. Shouse v. Pierce County, 559 F.2d 1142, 1147 (9th

2

Cir. 1977). Rocket Lawyer’s reliance on California case law is misplaced, and federal

3

law does do not support the inclusion of showing “acquiescence” by LegalZoom as an

4

alternative to showing prejudice to Rocket Lawyer.
b.

5

Waiver

6

(1)

LegalZoom possessed the right to bring claims against Rocket Lawyer;

7

(2)

LegalZoom possessed actual or constructive knowledge of this right; and

8

(3)

LegalZoom either
(a) expressly released and discharged the right to such claims, or

9
10

(b) engaged in conduct so inconsistent with any intent to bring such claims

11

as to induce Rocket Lawyer’s reasonable belief that the right had been relinquished.

12

See Gaunt v. Prudential Ins. Co. of America, 255 Cal. App. 2d 18, 23 (1967);

13

In re Marriage of Paboojian, 189 Cal. App. 3d 1434, 1437 (1987); Rubin v. Los

14

Angeles Federal Saving & Loan Assn., 159 Cal. App. 3d 292, 298 (1984).

15

LegalZoom’s Contentions Regarding Elements of Claim:

16

Waiver is the intentional relinquishment of a known right. Groves v. Pickett,

17

420 F.2d 1119, 1125 (9th Cir. 1970). Rocket Lawyer must therefore demonstrate that

18

LegalZoom intended to give up the claims. A waiver is not effective unless the party

19

executing it is fully informed of:

20

1) the existence of the right being waived;

21

2) the meaning of the waiver;

22

3) the effect of the waiver; and

23

4) a full understanding of the explanation of the waiver.

24

Andrew Smith Co. v. Paul’s Pak, Inc., 754 F.Supp.2d 1120, 1131 (N.D. Cal. 2010).

25

The burden is on the party claiming a waiver to prove it by clear and convincing

26

evidence. Id.
c.

27

(1)

28

Estoppel

LegalZoom knew the facts relevant to its claims;
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(2)

1
2

believe LegalZoom would not bring those claims;
(3)

3
4

LegalZoom acted in such a way that Rocket Lawyer had a right to
Rocket Lawyer did not know that LegalZoom planned to bring its

claims; and

5

(4)

6

See City of Long Beach v. Mansell, 476 P.2d 423, 443 (Cal. 1970); Driscoll v.

7

Rocket Lawyer relied on LegalZoom’s conduct to its detriment

City of Los Angeles, 431 P.2d 245, 250 (Cal. 1967).

8

9.

9
10

Elements Required to Establish Rocket Lawyer’s Third
Affirmative Defense that LegalZoom has not sustained any
injury or incurred any loss or damages, any injury was caused
by acts of persons over whom Rocket Lawyer has no control

11

(1)

LegalZoom has failed to demonstrate any actual injury; or

12

(2)

LegalZoom has failed to demonstrate that any injury suffered resulted

13

from Rocket Lawyer’s advertisements.
See Harper House, Inc. v. Thomas Nelson, Inc., 889 F.3d 197, 210 (9th Cir.

14
15

1989) (“in a suit for damages under section 43(a), however, actual evidence of some

16

injury resulting from the deception is an essential element of the plaintiff’s case.”);

17

see also Southland, 108 F.3d at 1146 (reversing summary judgment granted to

18

defendant for lack of causation and injury, allowing for possible jury finding of actual

19

injury and causation); Hansen Beverage Co. v. Vital Pharmaceutical, Inc., 2010 WL

20

3069690, at *6-7 (S.D. Cal. Aug. 3, 2010) (citing Harper House, Inc. v. Thomas

21

Nelson, Inc., 889 F.2d 197, 209 (9th Cir. 1989) (“when advertising does not directly

22

compare defendant’s and plaintiff’s products, when numerous competitors participate

23

in a market, or when the products are aimed at different market segments, injury to a

24

particular competitor may be a small fraction of the defendant’s sales, profits, or

25

advertising expenses.”).

26
27

LegalZoom’s Contentions Regarding Elements of Claim:

28

Rocket Lawyer’s third affirmative defense is not “lack of harm,” and so the
16
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above elements and legal discussion appear to have no relevance to that defense. If

2

Rocket Lawyer is now attempting to argue a lack of “harm” as a defense to

3

LegalZoom’s false advertising claims, then LegalZoom notes that such a defense was

4

never pled.
Rocket Lawyer is also mistaken about the need to prove damages. LegalZoom

5
6

need not prove actual damages in order to obtain a monetary award pursuant to 15

7

U.S.C. section 1117(a); rather, the preferred approach allows the Court to fashion

8

relief, including monetary, based on the totality of the circumstances. Southland Sod

9

Farms v. Stover Seed Co., 108 F.3d 1134, 1146 (9th Cir. 1997).

10

“[A]lthough the Ninth Circuit in Harper House stated that ‘actual

11

evidence of some injury resulting from the deception is an essential

12

element’ in a suit for damages under § 43(a), id. (emphasis omitted), a

13

more recent decision holds that ‘an inability to show actual damages

14

does not alone preclude a recovery under section 1117.’ Lindy Pen Co. v.

15

Bic Pen Corp., 982 F.2d 1400, 1411 (9th Cir.1993) (quoting Bandag,

16

Inc. v. Bolser's Tire Stores, 750 F.2d 903, 919 (Fed.Cir.1984)). Under

17

Lindy Pen, the preferred approach allows the district court in its

18

discretion to fashion relief, including monetary relief, based on the

19

totality of the circumstances. Id.; see also Badger Meter, Inc. v. Grinnell

20

Corp., 13 F.3d 1145, 1157 (7th Cir.1994) (stating that, even if a plaintiff

21

is unable to demonstrate damages resulting from the defendant's § 43(a)

22

violation, § 1117 allows the district court to award the plaintiff any just

23

monetary award so long as it constitutes ‘compensation’ for the

24

plaintiff's losses or the defendant's unjust enrichment and is not simply a

25

“penalty” for the defendant's conduct).”

26

Id.

27
28
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10.

1
2
3
4
5
6
7
8

LegalZoom’s claims are barred, in whole or in part, because LegalZoom cannot
demonstrate that (1) that any statement made by Rocket Lawyer in advertising
actually deceived or has the tendency to deceive a substantial segment of its audience.
Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997);
Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1054 (9th Cir. 2008); 15
U.S.C. § 1125(a)(1)(B).

9

D.

10

1.

12

16
17
18
19

The evidence through documents produced by the parties and testimony by fact
and expert witnesses will show:
1.

subscription plans, independent attorney consultation time, and other legal services at
affordable prices.
2.

24
25

28

RocketLawyer.com has been in operation since fall 2008.

4.

Rocket Lawyer and LegalZoom also compete with many other

competitors in the legal services industry.
5.

Both offer incorporation and business formation services and other

online legal products through their websites.
6.

Rocket Lawyer advertises several free services online.

7.

26
27

LegalZoom.com has been in operation since 2000.

3.

21

23

Rocket Lawyer and LegalZoom are competitors in the online legal

services market, which consists of companies offering access to legal forms,

20

22

Counterclaim 1: Rocket Lawyer has not violated the Lanham
Act.

13

15

Elements and Key Evidence for Rocket Lawyer’s Counterclaims and
Affirmative Defenses

11

14

Elements Required to Establish Rocket Lawyer’s Fourth
Affirmative Defense of No Likelihood of Confusion

On its website, Rocket Lawyer offers affordable legal services to

individuals, families and business owners.
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1

8.

Rocket Lawyer utilizes a “freemium” business model.

2

9.

LegalZoom complains of four types of Rocket Lawyer’s free

3

advertisements:

4

(a)

5

Free business formation ads (incorporations, LLCs) that were placed on

search engine results;

6

(b)

Free trial offers made on RocketLawyer.com;

7

(c)

Free help from local attorneys offered on RocketLawyer.com; and

8

(d)

Free legal review offered on RocketLawyer.com.

9

10.

LegalZoom admits that its complaints are not related to the purchase

10

process.
11.

11

The claims address consumer impressions formed at the point of

12

reviewing an advertisement, before the point of purchase, not once the consumer has

13

embarked on the purchase journey.
12.

14

Freemium business models, which allows users to use a part of the

15

service for free, but may require payment at a later point, exist in a number of

16

different industries, including online legal services.
13.

17
18

LegalZoom has also operated websites that employ a freemium business

model, such as CreatingWill.com, LegalCenterPro.com and LightWaveLaw.com.
14.

19

There are many free trials offered in the internet marketplace, including

20

offers from LegalZoom, Microsoft, Amazon, Turbo Tax, Netflix, Sirius XM, and

21

many others identified by respondents in the Wind Survey.

22

15.

23

inception.

24

16.

Rocket Lawyer has offered a free trial of its subscription plans since
Users or visitors are consumers who have visited RocketLawyer.com and

25

may have used some of its free services, but did not provide an email to Rocket

26

Lawyer.
17.

27
28

Rocket Lawyer “registered users” are individuals who have provided

Rocket Lawyer with an email address to create an account profile.
19
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18.

1
2

Over 90% of Rocket Lawyer’s registered users have not paid Rocket

Lawyer for use of its services.
19.

3

Rocket Lawyer advertises free documents on search engine results, and

4

Rocket Lawyer registered users have always been able to obtain the free document

5

advertised by signing up for a free trial and canceling before the end of the free trial

6

period.
20.

7
8

copy of a free document without being enrolled in a free trial.
21.

9
10

Since at least 2011, Rocket Lawyer has allowed users to download a
Rocket Lawyer’s website offers numerous free produces and services

such as downloadable government forms, letters, articles, etc.
22.

11

Rocket Lawyer and LegalZoom, like other competitors in this market,

12

advertise their services on search engines such as Google and Bing through paid

13

search advertising (or search engine marketing), and on their own websites.
23.

14

A search results page on either Google or Bing includes both paid search

15

advertisements, which appear as the top three search results and are designated as an

16

“AD” or “Ads,” and organic search results, which appear below the paid search

17

results.
24.

18
19

Organic search results are free listings on Google or Bing that appear

because of relevance to a user’s search terms.
25.

20

Google and Bing also allow businesses to engage in paid search

21

advertising by bidding on terms—“keywords”—that users may enter into the search

22

field.
26.

23
24

If the words people type in Google match keywords bid on by a

company, that company’s ad can appear above or next to the search results.
27.

25

When a user searches for “incorporation,” immediately above or along

26

the side of the organic search results are ads for businesses that have bid on that

27

term—LegalZoom, Rocket Lawyer, LawDepot, IncforFree, etc.—and the organic

28

search results follow.
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28.

1

Google and Bing employ algorithms that determine which ads appear by

2

taking into account amounts companies have bid on keywords and the relevance of

3

the company to the word searched.
29.

4
5

The more a company is willing to pay for its ad to appear on a search

term, the more likely that company’s ad will appear.
30.

6

The three ads that appear immediately above the organic search results

7

are considered to be in better positions than the ads that appear to the right of the

8

organic search results.
31.

9
10

Each of the advertisements at issue in this case either contains a link to

Rocket Lawyer’s website or is published directly on its website.
32.

11

Google and Bing each allow companies to bid on the brand names of

12

other companies in search engine marketing. For example, Starbucks can bid on the

13

search term “Pete’s Coffee” so that an ad for Starbucks could appear on a search for

14

Pete’s.

15

33.

Google is very concerned about the user experience.

16

34.

Google disapproves ads that violate its policies and will not allow ads

17

that continue to violate its policies to be published.
35.

18
19

When Google finds a potential violation of its policies, it typically sends

a policy violation notice.
36.

20

Google does not always provide written communication that a policy

21

violation has been cleared; instead, these types of communications are often by

22

telephone and by Google allowing the ads at issue to be published.

23

37.

An ad that continues to run on Google satisfies its policies.

24

38.

A conversion is a term used by online companies that helps them

25

understand what consumers do after clicking on a company’s ad. A conversion

26

happens when someone clicks a company’s ad and then takes an action that the

27

company has defined as valuable to its business.
39.

28

“Conversion” as used by Rocket Lawyer has multiple meanings,
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1

including when a person starts a document, reaches the end of a document interview,

2

provides an email address to create a profile, starts a free trial, downloads a free

3

document at the end of a document interview, purchases an individual document, or

4

becomes a paying member either at the end of a free trial or by choosing to become a

5

paying member after a document interview.
40.

6
7

business was formed or that a customer paid any fees to Rocket Lawyer.
41.

8
9

A “conversion” as used by Rocket Lawyer does not necessarily mean a
Google and Bing count one “click” each time someone accesses a

company’s website through the company’s search engine ad.
42.

10

The ”conversion rate” is the number of conversions resulting from each

11

click, which is calculated by simply taking the number of conversions and dividing

12

that by the number of total ad clicks during the same time period .
43.

13
14

processing services for incorporation or forming an LLC or business entity.
44.

15
16

Rocket Lawyer has published business formation ads, which offer
Free business formation ads are ads that offer free processing for creating

a company, such as “free incorporation” or “free llc.”
45.

17

While a majority of Rocket Lawyer’s free business formation ads

18

included a reference to mandatory state fees, “pay only state fees” or similar

19

language, some did not.
46.

20
21

Rocket Lawyer’s free business formation ads did not reference state fees.
47.

22
23

After March 2013, all of Rocket Lawyer’s free business formation ads

disclosed state fees.
48.

24
25

Between second quarter 2009 and March 2013, approximately 18% of

After March 2013, the average number of businesses formed on Rocket

Lawyer remained basically unchanged.
49.

26

Upon visiting Rocket Lawyer’s website, a consumer is presented with

27

details of its services and disclosures about the terms of the free trial and the fact that

28

state incorporation fees must be paid even though Rocket Lawyer’s processing and
22
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1

filing incorporation services are free.
50.

2

On RocketLawyer.com, consumers can also complete articles of

3

incorporation or of an LLC, print out the completed form, and file the articles, paying

4

state fees directly to the state—or not, as they choose—without ever paying any fees

5

to Rocket Lawyer.
51.

6

Rocket Lawyer offered two types of subscription plans—a Pro Legal

7

Plan with access to all of Defendant’s functionality, and a Basic Legal Plan, which

8

excludes the functionality related to forming or running a business.

9

52.

Rocket Lawyer offered free trials of its Basic and Pro Legal Plans.

10

53.

The free trials of both plans were for seven days at no cost, provided that

11

the consumer cancels the plan by the end of the seventh day.
54.

12
13

If a consumer chooses not to cancel the trial plan by the end of the

seventh day, the trial converts to a paid version of the plan on the eighth day.
55.

14

Rocket Lawyer’s website contains explanations of the terms of the paid

15

plans and the free trials along the consumer journey before consumers have to make a

16

purchasing decision.
56.

17

Rocket Lawyer does not charge a fee for its services in assisting in the

18

filing and processing of incorporation or entity formation papers for members

19

enrolled in a free trial or paid the Pro Legal Plan.
57.

20
21

who require incorporation services pay only the state-mandated filing fees.
58.

22
23

Members enrolled in Rocket Lawyer’s free trial or paid Pro Legal Plan
Rocket Lawyer discloses at various stages of its incorporation interview

before requiring any payment information and before the purchase is complete.

24

59.

25

forming an LLC.

26

60.

27

LegalZoom charges at least $99 plus state fees for incorporation or
Rocket Lawyer’s service is $0 plus state fees for free trial or paid Pro

Legal Plan members.
61.

28

Rocket Lawyer makes its customers click a button acknowledging that
23
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1

they have read and agree to the terms of service before they commit to a trial period.
62.

2
3

formation services.
63.

4
5

64.

LegalZoom has advertised the price of its business formation services

without disclosing the additional cost of state fees.
65.

8
9

Rocket Lawyer still offers its business formation services for $0 plus

state fees to through its free trial offer.

6
7

LegalZoom now charges at least $149 plus state fees for business

Just like Rocket Lawyer, LegalZoom business formation advertisements

provide a link to its website where the mandatory state fees are disclosed.
66.

10

Between November 2008 and September 2013, Rocket Lawyer

11

published a total of 51 free trial search engine advertisements on LegalZoom

12

keywords, that led to one click, zero conversions, and zero dollars for Rocket Lawyer.
67.

13
14

for a document on Google or Bing.
68.

15
16

69.

The user can then complete an interactive interview to create the

searched-for document.
70.

19
20

After clicking on a link in the ad, the user would be taken to

RocketLawyer.com.

17
18

A typical Rocket Lawyer user comes to Rocket Lawyer by first searching

At the end of the interview, the user could enroll in a free trial, a monthly

plan, or an annual plan.
71.

21

If the user chooses the Free Trial Offer, the user would be taken to a

22

payment processing page where the user can read the terms of the free trial, other

23

Rocket Lawyer agreements, and insert credit card information.
72.

24

Rocket Lawyer notifies customers enrolling in the free trial that their

25

credit cards will be charged, and the amount of that charge, if they do not cancel the

26

subscription after seven days by displaying the terms of the free trial at the top of the

27

registration page.
73.

28

The toll free phone number to cancel a free trial is at the top of every
24
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1

registration page.
74.

2
3

Rocket Lawyer has an FAQ section which details the different ways a

customer can cancel any plan.
75.

4

The fact that a customer will be charged if she fails to cancel her

5

membership after seven days does not negate the fact that the trial period itself is

6

unconditionally free.
76.

7

Rocket Lawyer’s subscription plans include access to Rocket Lawyer’s

8

On Call attorneys who can provide legal advice or live consultations, answer written

9

questions, and/or review legal documents.
77.

10
11

Outside of the On Call program, registered users, whether on a free trial

or a paid legal plan, can contact an attorney for a free consultation.

12

78.

Rocket Lawyer now allows all members access to Legal Review.

13

79.

On the same screen as the Free Trial Offer at the end of a document

14

interview, Rocket Lawyer disclosed that free document review was available

15

immediately in the annual plan, after 90 days for the monthly plan, and not included

16

in the free trial.

17

80.

Rocket Lawyer’s website also provides a link to its On Call Terms of

18

Service which explains that registered users, including members and those enrolled in

19

a free trial, have access to free legal help and consultations.
81.

20
21

“free legal review” on Google or Bing.
82.

22
23

83.

Rocket Lawyer has registered www.legalzoomer.com and

www.legalzoomgadget.com.
84.

26
27

The Federal Trade Commission has never contacted Rocket Lawyer

about its free advertisements.

24
25

Rocket Lawyer does not advertise “free help from local attorneys” or

Rocket Lawyer has not used these domain names as they have been and

continue to be error webpages with no content.
85.

28

Neither www.legalzoomer.com or www.legalzoomgadget.com leads to
25
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1

Rocketlawyer.com.
86.

2
3

Professor Jerry Wind conducted a survey with two experiments to test

LegalZoom’s allegations relating to business formation ads and free trial ads.
87.

4

In the first experiment, Professor Wind tested whether adding “pay only

5

state fees” to Rocket Lawyer’s test ads would have had any effect on consumers’

6

decision to choose Rocket Lawyer or LegalZoom based only on the search engine

7

advertisement.
88.

8
9
10

the same place, in the same position amongst other ads that appeared in a real search
for “incorporation.”
89.

11
12

90.

There was no significant difference between the test and control groups

with respect to their decision to choose Rocket Lawyer.
91.

15
16

After viewing the search engine results and ads, respondents were asked

which of the companies advertised did the user want to explore further.

13
14

The test and control ads in the Wind incorporation stimuli were placed in

There was no significant difference between the test and control groups

with respect to their decision to choose LegalZoom.
92.

17

Respondents continued along the consumer journey where disclosures of

18

state fees were made multiple times in the same positions where such disclosures

19

were provided on RocketLawyer.com.
93.

20

After continuing along the consumer journey through the point of

21

purchase, consumers were asked whether they understood the that they had to pay

22

state fees to incorporate a business through Rocket Lawyer.
94.

23

There was no significant difference between the test and control groups

24

with respect to their understanding that they must pay state fees to incorporate with

25

Rocket Lawyer.

26

95.

27

In the second experiment, respondents were taken along the consumer

journey for enrolling in a free trial.
96.

28

After reviewing Rocket Lawyer’s free trial offer and disclosures, there
26
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1

was significant no difference in the decisions of the test and control groups to take the

2

free trial.

3

97.

After reviewing Rocket Lawyer’s free trial offer and disclosures, there

4

was significant no difference in the decisions of the test and control groups to

5

continue searching for other legal services providers.
98.

6
7

Only an average of 5.4% of respondents across both experiments and test

and control groups decided to not purchase online legal services at all.

8

99.

LegalZoom conduct a survey with their expert, Dr. Bruce Isaacson.

9

100. Contrary to the Court’s summary judgment order and applicable law, the

10

Isaacson Survey did not allow respondents to view the competitor ads that any real

11

world consumer would encounter.

12

101. The Isaacson stimuli for testing business formation only displayed a

13

search engine ad page with Rocket Lawyer’s ad circled and all other competitors

14

blurred out.
102. Respondents were not allowed to see the disclosures of state fees on

15
16

RocketLawyer.com noted by the Court.
103. Dr. Isaacson did not test whether Rocket Lawyer diverted consumers

17
18

away from LegalZoom.
104. Dr. Isaacson also tested Rocket Lawyer’s offer of “free help from local

19
20

attorneys.”
105. In the free help stimuli, Dr. Isaacson only showed respondents one or

21
22

two pages of Rocket Lawyer’s website.
106. Dr. Isaacson tested respondents’ understanding of limitations on Rocket

23
24

Lawyer’s offer of “free help from local attorneys” that do not exist.

25

107. In neither the business formation or free help experiments did Dr.

26

Isaacson take consumers to the point where they would make a decision about

27

whether to purchase a service from Rocket Lawyer.
108. Dr. Isaacson did not test LegalZoom’s allegations relating to free trials or

28

27
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1

free legal review.
109. LegalZoom has found difficulty swaying users looking for free towards a

2
3

product with a price tag. According to LegalZoom’s tracking conventions, “affinity”

4

is a numeric score ssigned to websites that appear on searches for specific keywords.

5

110. The affinity score shows the relationship between two websites by seeing

6

how many more times the audiences of the two websites are going to choose the other

7

for specific keywords.
111. In comparing Rocket Lawyer and LegalZoom, LegalZoom has found

8
9

that for the target audience for LegalZoom, Rocket Lawyer is ranked #6, which

10

means that more often, those searching LegalZoom are interested in companies other

11

than Rocket Lawyer to also explore.
112. LegalZoom is not even in the top 10 of sites visited from a search related

12
13

to Rocket Lawyer.
113. Rocket Lawyer’s call volume data shows that less than 1% of its services

14
15

calls involved “questions” or “complaints” about “free.”

16

114. The Better Business Bureau (BBB) only has complaints for LegalZoom

17

going back to march 2013 because of an internal transition of the BBB Los Angeles.
115. Between March 2013 and August 1, 2014, LegalZoom had 133

18
19

complaints on the BBB in 1 year and 4 months—8.3 complaints/month.
116.

20
21

5 complaints/month).
2.

22

Counterclaim 2: Rocket Lawyer has not violated the FAL.

See supra Sec.7.D.1

23

3.

24

Counterclaim 3: Rocket Lawyer has not violated the UCL.

See supra Sec. 7.D.1

25

4.

26

Counterclaim 4: LegalZoom Violated the Lanham Act

The evidence through documents produced by the parties and testimony by fact

27
28

As of August 1, 2014, Rocket Lawyer had 181 complaints over 3 years-

and expert witnesses will show:
28
FINAL PRETRIAL CONFERENCE ORDER
964079.3

1

1. Travis Giggy is a shareholder of LegalZoom and was a LegalZoom employee

2

and/or consultant off and on between May 2003 and March 2013, providing

3

services relating to coding, customer interfacing, and the affiliate program.

4

2. Own Vision LLC is a company owned by Travis Giggy.

5

3. Own Vision does business as LegalSpring.com, which is a website started by

6
7

Travis Giggy in 2004 while he was still an employee of LegalZoom.
4. Travis Giggy started LegalSpring as an affiliate website to demonstrate to

8

LegalZoom’s founders and management the potential benefit of an affiliate

9

program.

10
11

5. Affiliates are third parties who agree to display links to a company’s website and
receive compensation for the traffic they drive to that company.

12

6. Affiliates typically receive compensation in the form of a percentage of initial

13

orders completed by consumers who accessed the company’s website through

14

the affiliate’s website.

15

7. Affiliates may be compensated with a flat fee, but this arrangement is rare.

16

8. To the extent that consumers visit LegalZoom’s website as a result of having first

17

visited Legalspring.com, LegalZoom has provided compensation to

18

Legalspring.com.

19
20
21
22

9. As LegalZoom’s affiliate, LegalSpring is formatted as a review website for
online legal service providers since 2004.
10. LegalZoom has been a company reviewed and listed on LegalSpring since
LegalSpring’s inception.

23

11. LegalSpring has reviews for a handful of other online legal services companies.

24

12. LegalSpring also has a star rating on a scale of 1 to 5 for LegalZoom and the

25
26
27
28

other companies listed on its website.
13. A company’s star rating is affected by the number of positive and negative
reviews it has.
14. LegalSpring identifies LegalZoom as the best online legal services company.
29
FINAL PRETRIAL CONFERENCE ORDER
964079.3

1

15. LegalZoom through representatives including Brian Lee (founder), Brian Liu

2

(co-founder, former CEO, and current Chairman), and Scott MacDonnell (former

3

VP of Marketing), requested that negative reviews of its website be removed

4

from LegalSpring.

5
6
7

16. Removal of negative reviews about LegalZoom caused its overall rating on
LegalSpring to improve.
17. LegalZoom through representatives, Brian Lee (founder), Brian Liu (co-founder,

8

former CEO, and current Chairman), and Scott MacDonnell (former VP of

9

Marketing), provided positive reviews to Travis Giggy and requested that they be

10
11
12
13

added to LegalSpring.
18. Adding positive reviews about LegalSpring caused its overall rating on
LegalSpring to improve.
19. LegalZoom benefits from its reputation on LegalSpring.com as it has found that

14

the number of negative reviews directly affects its conversion rates from

15

LegalSpring.com.

16
17
18
19
20
21
22
23
24
25
26
27
28

20. The positive reviews provided by LegalZoom appear to this day on
Legalspring.com, held out as consumer reviews posted on Legalspring.com.
21. LegalZoom has not produced any documents that users have provided
LegalZoom with permission to post their statements.
22. Mr. Giggy modified the time stamps of these reviews with knowledge and/or
approval from LegalZoom.
23. Mr. Giggy also modified the star ratings allegedly provided by users with the
knowledge and/or approval from LegalZoom.
24. LegalZoom and its employees are aware of the importance of customer reviews
to consumers and thus, its business.
25. Employees may have sought to conceal their manipulation of review sites by
avoiding reviews from work computers.
26. On Legalspring.com, consumers viewing the reviews can indicate whether they
30
FINAL PRETRIAL CONFERENCE ORDER
964079.3

1
2

are “helpful” or not.
27. At least three reviews added at LegalZoom’s instruction indicate that a majority

3

of consumers who responded found those reviews helpful. 21 of 28 people have

4

found Matt S.’s review helpful, 17 of 21 people have found Linda H.’s review

5

helpful, and 11 of 16 people have found Dr. Mark S.’s review helpful.

6
7
8
9

28. LegalZoom has gained conversions from LegalSpring.com further demonstrating
consumers’ reliance on the reviews.
29. Many years after LegalSpring.com was created and became affiliated with
LegalZoom – LegalZoom requested that Mr. Giggy add a disclaimer on

10

LegalSpring.com explaining that affiliates of the website were allowed to alter

11

content on the website.

12
13
14
15
16
17
18
19
20
21
22

30. Of the companies listed on LegalSpring.com, only LegalZoom has rebutted
negative reviews.
31. For years prior to selling LegalSpring.com, Travis Giggy was no longer
interested in operating LegalSpring.
32. Travis Giggy continued to respond regarding LegalSpring matters when
LegalZoom would request assistance.
33. Mr. Giggy, with LegalZoom’s knowledge and consent, kept some negative
reviews on LegalSpring to maintain an image of impartiality.
34. LegalZoom did not purchase LegalSpring and Travis Giggy remained owner of
record to maintain LegalSpring’s third party affiliate status.
35. LegalZoom used LegalSpring in search engine marketing to ensure that

23

consumers searching for legal services would see LegalSpring and potentially,

24

the positive rating and reviews of LegalZoom.

25

36. LegalZoom controlled LegalSpring’s Google adwords account.

26

37. LegalZoom controlled when LegalSpring was actively bidding on searching

27
28

keywords and when such activity was paused.
38. LegalZoom also paid for LegalSpring search engine advertising.
31
FINAL PRETRIAL CONFERENCE ORDER
964079.3

1

39. To avoid detection by Google, LegalZoom managed LegalSpring.

2

40. LegalZoom was aware that using LegalZoom, LegalSpring, and LegalCenterPro

3

to bid on keywords at the same time would cause other competitors to have to

4

spend more money on search engine marketing.

5

41. LegalZoom used LegalZoom, LegalSpring, and LegalCenterPro to bid on the

6

same keywords to keep Rocket Lawyer from appearing in the top three spots for

7

search engine marketing.

8

42. Google has investigated whether LegalZoom had violated its “double serving”

9

policy by using these companies to bid on the same keywords in search engine

10
11

marketing.
43. When Travis Giggy sold LegalSpring to a third party in March 2013, Travis

12

Giggy explained to the buyer that the principals of LegalZoom are his friends

13

and that he wanted them to continue to be taken care of even after the sale.

14

44. LegalZoom’s review and star rating remains on LegalSpring.com to this day.
5.

15

Counterclaim 5: LegalZoom Violated the FAL

See supra Sec. 7.D.4.

16

6.

17

Counterclaim 6: LegalZoom Violated the UCL

See supra Sec. 7.D.4.

18

7.

19

Affirmative Defense 1: LegalZoom’s claims are barred, in

20

whole or in part, for want of equity or by the doctrine of

21

unclean hands.
The evidence through documents produced by the parties and testimony by fact

22
23

and expert witnesses will show that LegalZoom has disclosed its pricing without

24

disclosing state fees and has offered a free trial that consumers have complained was

25

misleading. Regarding the free trial, LegalZoom also requires that consumers provide

26

a credit card in order to access the free trial. Indeed, users’ access to the free trial

27

offer is contingent on prior provision of a credit card to make a different purchase.
8.

28

Affirmative Defense 2: LegalZoom’s claims are barred, in
32
FINAL PRETRIAL CONFERENCE ORDER

964079.3

whole or in part, by laches, waiver, and/or estoppel.

1

The evidence through documents produced by the parties and testimony by fact

2
3

and expert witnesses will show:

4

1. LegalZoom has delayed in bringing the lawsuit.

5

2. LegalZoom was aware that Rocket Lawyer was still advertising the allegedly
offending ads, even after LegalZoom complained to Google.

6
7

3. LegalZoom was aware that if Google allows ads to be published, they are not in
violation of Google’s policies.

8
9

1.

10

Affirmative Defense 3: LegalZoom has not sustained any
injury or incurred any loss or damages, any injury was caused
by acts of persons over whom Rocket Lawyer has no control

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

The evidence through documents produced by the parties and testimony by fact
and expert witnesses will show:
1. Rocket Lawyer’s advertisements did not have a significant effect on
consumers’ perceptions or understanding of the ads at issues;
2. The performance of Rocket Lawyer’s search engine advertisements at issue
demonstrate that disclosing plus state fees improved ad performance.
3. LegalZoom has not been harmed by Rocket Lawyer’s ads
4. LegalZom believes that it does not compete for the same market as Rocket
Lawyer.
5. There are many competitors in the online legal services market.
6. LegalZoom has delayed in bringing the lawsuit.
7. LegalZoom was aware that Rocket Lawyer was still advertising the allegedly
offending ads, even after LegalZoom complained to Google.
8. LegalZoom was aware that if Google allows ads to be published, they are not in
violation of Google’s policies.
9. LegalZoom’s practices, such as operating three other companies in the online
33
FINAL PRETRIAL CONFERENCE ORDER
964079.3

1

legal services market, that cause its own loss of profits or increase in

2

advertising costs.
2.

3

Affirmative Defense 4: Rocket Lawyer’s practices have not

4

caused any likelihood of confusion; any likelihood of confusion

5

is caused by LegalZoom.

6

See supra Sec. 7.D.10.

7
8

LEGALZOOM’S AFFIRMATIVE DEFENSES TO COUNTERCLAIMS
A.

9

Affirmative Defenses and Elements

Plaintiff/Counter-defendant plans to pursue the following affirmative defenses:

10

Second Affirmative Defense: Unclean Hands

11
12

1) LegalZoom acted fairly in the matter for which it seeks a remedy.

13

2) Rocket Lawyer engaged in inequitable conduct related to the subject matter of
its claims that violates conscience or good faith.

14
15

Kendall-Jackson Winery, Ltd. v. Superior Court, 76 Cal. App. 4th 970, 978, 90 Cal.

16

Rptr. 2d 743 (1999); Fibreboard Paper Prods. Corp. v. East Bay Union of

17

Machinists, 227 Cal. App. 2d 675, 728 (1964).
Seventh Affirmative Defense: No Agency

18

Any injury allegedly sustained by Rocket Lawyer was caused by acts or

19
20

omissions of persons over whom LegalZoom neither exercised nor had any right of

21

control, for whom LegalZoom is and was not responsible, and whose conduct

22

LegalZoom had no duty or reason to control. Specifically, Legalspring.com’s

23

registrant and manager, Travis Giggy, is not, and was not at the times alleged in the

24

counterclaim, LegalZoom’s agent.
B.

25

In brief, the key evidence Plaintiff/Counter-defendant relies on for each

26
27

Key Evidence Regarding LegalZoom’s Affirmative Defenses

affirmative defense is:
Second Affirmative Defense: Unclean Hands

28

34
FINAL PRETRIAL CONFERENCE ORDER
964079.3

1

1) Same as Claim 1 above.

2

2) There is no evidence that LegalZoom violated the Lanham Act by posting false
or misleading internet advertisements.

3
4

Seventh Affirmative Defense: No Agency

5
6

1) Testimony of Travis Giggy and supporting documents

7

2) Testimony of Scott MacDonell and supporting documents

8

3) Testimony of Dorian Quispe and supporting documents

9

4) Contract between LegalZoom and Own Vision LLC

10

ISSUES REMAINING FOR TRIAL

11

8.

12

In view of the admitted facts and the elements required to establish the claims,

13

counterclaims and affirmative defenses, the following issues remain to be tried:
LEGALZOOM CLAIMS AND DEFENSES

14

LEGALZOOM’S CLAIM 1:

15

 Whether Rocket Lawyer engaged in false or misleading advertising

16

under the Lanham Act, 15 U.S.C. § 1125(a):

17
18

o Whether the Rocket Lawyer advertisements were literally false

19

o Whether the Rocket Lawyer advertisements were deceptive or
misleading to the target audience

20

o Whether Rocket Lawyer intended to run false or deceptive

21

advertisements

22

o Whether the deception caused by Rocket Lawyer’s advertisements

23
24

was likely to influence the purchasing decision of users who

25

viewed the advertisements
 Whether LegalZoom has been or was likely to be injured as a result of

26

the false or misleading advertisements run by Rocket Lawyer

27

 Whether LegalZoom has been or is likely to be injured as a result of the

28

35
FINAL PRETRIAL CONFERENCE ORDER
964079.3

1

Rocket Lawyer “free” advertisements, either by direct diversion of sales

2

or by a lessening of goodwill

3

 The amount of damages LegalZoom is entitled to recover

4

 Whether LegalZoom is entitled to injunctive relief and the form of any
injunctive relief

5

 The amount of attorneys’ fees to be awarded to LegalZoom pursuant to

6

15 U.S.C. section 1117(a)

7
8

Rocket Lawyer contends the following additional issues remain:

9

 Rocket Lawyer contends that this claim is limited to the four categories

10
11

of advertisements alleged by LegalZoom and not all ads that may

12

reference free. These four categories are:
o Free Business Formation Ads: Advertising free business entity

13
14

formation on search engines results (“Free incorporation” or “Free

15

LLC”) with state fee disclosures made multiple times on

16

RocketLawyer.com before the point of purchase;
o Free Trial Offers: Advertising a free trial on RocketLawyer.com

17

without adequately disclosing the terms of the free trial

18

o Free Help Ads: advertising “free help from local attorneys” on

19

RocketLawyer.com; and

20
21

o Free Legal Review Ads: advertising “free legal review” on

22

RocketLawyer.com (collectively, the “RLI Free Ads”).

23

 Whether this claim is barred by Rocket Lawyer’s affirmative defenses.

24

 The amount of attorneys’ fees to be awarded to LegalZoom pursuant to
15 U.S.C. section 1117(a).

25
26

LEGALZOOM’s CLAIM 2:

27

 Whether Rocket Lawyer violated California Business and Professions

28

36
FINAL PRETRIAL CONFERENCE ORDER
964079.3

Code section 17500:

1
2

o Whether Rocket Lawyer made an untrue or misleading statement

3

in connection with the sale or disposition of goods or services
o Whether Rocket Lawyer either knew or in the exercise of

4
5

reasonable care should have known that its statement was untrue

6

or misleading
o Whether members of the target audience for the statement were

7

likely to be deceived

8

 The amount of restitution LegalZoom is entitled to recover

9

 Whether LegalZoom is entitled to injunctive relief and the form of any

10

injunctive relief

11

 The amount of attorneys’ fees to be awarded to LegalZoom pursuant to

12

California Code of Civil Procedure section 1021.5

13
14
15

Rocket Lawyer contends the following additional issues remain:
 Rocket Lawyer contends that this claim is limited to the four categories

16
17

of advertisements alleged by LegalZoom and not all ads that may

18

reference free. These four categories are:
o Free Business Formation Ads: Advertising free business entity

19
20

formation on search engines results (“Free incorporation” or “Free

21

LLC”) with state fee disclosures made multiple times on

22

RocketLawyer.com before the point of purchase;
o Free Trial Offers: Advertising a free trial on RocketLawyer.com

23

without adequately disclosing the terms of the free trial

24

o Free Help Ads: advertising “free help from local attorneys” on

25

RocketLawyer.com; and

26
27

o Free Legal Review Ads: advertising “free legal review” on

28

RocketLawyer.com (collectively, the “RLI Free Ads”).
37
FINAL PRETRIAL CONFERENCE ORDER
964079.3

1

 Whether this claim is barred by Rocket Lawyer’s affirmative defenses.

2

 Whether attorneys’ fees should be awarded under California Code of
Civil Procedure section 1021.

3

LEGALZOOM’s CLAIM 3:

4

 Whether Rocket Lawyer engaged in a business practice that is forbidden

5

by law:

6
7

o Whether violated the Lanham Act

8

o Whether Rocket Lawyer violated California Business and
Professions Code section 17500

9
10

 The amount of restitution LegalZoom is entitled to recover

11

 Whether LegalZoom is entitled to injunctive relief and the form of any
injunctive relief

12

 The amount of attorneys’ fees to be awarded to LegalZoom pursuant to

13

California Code of Civil Procedure section 1021.5

14
15
16

Rocket Lawyer contends the following additional issues remain:
 Rocket Lawyer contends that this claim is limited to the four categories

17
18

of advertisements alleged by LegalZoom and not all ads that may

19

reference free. These four categories are:
o Free Business Formation Ads: Advertising free business entity

20
21

formation on search engines results (“Free incorporation” or “Free

22

LLC”) with state fee disclosures made multiple times on

23

RocketLawyer.com before the point of purchase;
o Free Trial Offers: Advertising a free trial on RocketLawyer.com

24

without adequately disclosing the terms of the free trial

25

o Free Help Ads: advertising “free help from local attorneys” on

26

RocketLawyer.com; and

27

o Free Legal Review Ads: advertising “free legal review” on

28

38
FINAL PRETRIAL CONFERENCE ORDER
964079.3

1

RocketLawyer.com (collectively, the “RLI Free Ads”).

2

 Whether this claim is barred by Rocket Lawyer’s affirmative defenses.

3

 Whether attorneys’ fees should be awarded under California Code of
Civil Procedure section 1021.

4
5

LEGALZOOM’s FIRST AFFIRMATIVE DEFENSE: Unclean Hands

6

 Whether Rocket Lawyer engaged in inequitable conduct which relates to

7
8

the subject matter of Rocket Lawyer’s claims against LegalZoom.

9

 Whether such conduct, if it occurred, was sufficiently egregious (i.e.,
willful, in bad faith, or grossly negligent)

10
11
12

Rocket Lawyer contends the following additional issues remain:
 Whether the alleged inequitable conduct was directly related to the

13

subject of Rocket Lawyer’s claims against LegalZoom.

14
15

LEGALZOOM’s SECOND AFFIRMATIVE DEFENSE: No Agency

16

 Whether Travis Giggy, who was the registrant and manager of

17
18

Legalspring.com, acted as LegalZoom's agent in connection with his

19

operation of Legalspring.com.

20
21

Rocket Lawyer contends the following additional issues remain:

22

 Whether LegalZoom had direct control over LegalSpring.

23

 Whether LegalZoom had direct control over LegalSpring’s search engine
marketing.

24

 Whether Travis Giggy, registrant and moderator of LegalSpring.com,

25
26

and employee and/or consultant of LegalZoom, acted as LegalZoom’s

27

agent in executing LegalZoom’s directives with respect to the operation

28

of LegalSpring.com, including, but not limited to, the revision of content
39
FINAL PRETRIAL CONFERENCE ORDER
964079.3

1

of LegalSpring.com, and the search engine marketing of

2

LegalSpring.com.

3

ROCKET LAWYER CLAIMS AND DEFENSES

4

ROCKET LAWYER’S COUNTERCLAIM 1:

5

 Same as LegalZoom’s Claim 1, except that Rocket Lawyer need only

6

disprove one element of LegalZoom’s Lanham Act claim to prevail.

7

ROCKET LAWYER’S COUNTERCLAIM 2

8

 Same as LegalZoom’s Claim 2, except that Rocket Lawyer need only

9

disprove one element of LegalZoom’s FAL claim to prevail.

10

ROCKET LAWYER’S COUNTERCLAIM 3

11

 Same as LegalZoom’s Claim 3, except that Rocket Lawyer need only

12

disprove one element of LegalZoom’s UCL claim to prevail.

13
14

ROCKET LAWYER’S COUNTERCLAIM 4:

15

 Whether LegalZoom engaged in false or misleading advertising under

16

the Lanham Act, 15 U.S.C. § 1125(a):

17
18

o Whether the LegalZoom advertisements were literally false

19

o Whether the LegalZoom advertisements were deceptive or
misleading to the target audience

20

o Whether LegalZoom intended to run false or deceptive

21

advertisements

22

o Whether the deception caused by LegalZoom advertisements was

23
24

likely to influence the purchasing decision of users who viewed

25

the advertisements OR

26

 In the alternative, whether LegalZoom knowingly participated in the

27

creation, development and propagation of the false advertising campaign.

28

 Whether Rocket Lawyer has been or was likely to be injured as a result
40
FINAL PRETRIAL CONFERENCE ORDER
964079.3

of the false or misleading advertisements run by Rocket Lawyer

1
2

 The amount of damages Rocket Lawyer is entitled to recover

3

 Whether Rocket Lawyer is entitled to injunctive relief and the form of
any injunctive relief

4

 The amount of attorneys’ fees to be awarded to Rocket Lawyer pursuant

5

to 15 U.S.C. section 1117(a)

6
7

LEGALZOOM contends the following additional issues remain:

8

 Rocket Lawyer’s Counterclaim 4 is limited to statements made at

9
10

Legalspring.com, and the above listed issues about “LegalZoom

11

advertisements” should be limited to such statements.
 Whether the subject advertisements contain any false statement of fact

12

about a product which damaged Rocket Lawyer

13

 Whether Rocket Lawyer may proceed with this Counterclaim 4 in the

14
15

absence of market research or survey evidence showing that consumers

16

were either deceived or misled by statements made at Legalspring.com
ROCKET LAWYER’S COUNTERCLAIM 5

17

 Whether LegalZoom violated California Business and Professions Code

18

section 17500:

19

o Whether LegalZoom made an untrue or misleading statement in

20

connection with the sale or disposition of goods or services

21

o Whether LegalZoom either knew or in the exercise of reasonable

22
23

care should have known that its statement was untrue or

24

misleading
o Whether members of the target audience for the statement were

25

likely to be deceived; OR

26

 Whether LegalZoom had direct control over LegalZoom’s search engine

27

marketing, specifically, Google Adwords; OR

28

41
FINAL PRETRIAL CONFERENCE ORDER
964079.3

 Whether Travis Giggy, registrant and moderator of LegalSpring.com,

1
2

and employee and/or consultant of LegalZoom, acted as LegalZoom’s

3

agent in executing LegalZoom’s requests with respect to the operation of

4

LegalSpring.com, including, but not limited to, the revision of content of

5

LegalSpring.com, and the search engine marketing of LegalSpring.com;

6

 The amount of restitution Rocket Lawyer is entitled to recover

7

 Whether Rocket Lawyer is entitled to injunctive relief and the form of
any injunctive relief

8

 The amount of attorneys’ fees to be awarded to Rocket Lawyer pursuant

9

to California Code of Civil Procedure section 1021.5

10

LEGALZOOM contends the following additional issues remain:

11

 Rocket Lawyer’s Counterclaim 5 is limited to statements made at

12
13

Legalspring.com, and the above listed issues about “LegalZoom

14

advertisements” should be limited to such statements.
 Whether the subject advertisements contain any false statement of fact

15

about a product which damaged Rocket Lawyer

16

 Whether Rocket Lawyer may proceed with this Counterclaim 4 in the

17
18

absence of market research or survey evidence showing that consumers

19

were either deceived or misled by statements made at Legalspring.com
ROCKET LAWYER’S COUNTERCLAIM 6

20

 Whether LegalZoom engaged in a business practice that is either

21

unlawful, unfair, or fraudulent, including:

22
23

o Whether violated the Lanham Act; or

24

o Whether Rocket Lawyer violated California Business and
Professions Code section 17500.

25
26

 The amount of restitution Rocket Lawyer is entitled to recover

27

 Whether Rocket Lawyer is entitled to injunctive relief and the form of
any injunctive relief

28

42
FINAL PRETRIAL CONFERENCE ORDER
964079.3

 The amount of attorneys’ fees to be awarded to Rocket Lawyer pursuant

1

to California Code of Civil Procedure section 1021.5

2
3

LEGALZOOM contends the following additional issues remain:

4

 Rocket Lawyer’s Counterclaim 6 is limited to statements made at

5
6

Legalspring.com, and the above listed issues about “LegalZoom

7

advertisements” should be limited to such statements.
 Whether the subject advertisements contain any false statement of fact

8

about a product which damaged Rocket Lawyer

9

 Whether Rocket Lawyer may proceed with this Counterclaim 6 in the

10
11

absence of market research or survey evidence showing that consumers

12

were either deceived or misled by statements made at Legalspring.com

13

ROCKET LAWYER’S FIRST AFFIRMATIVE DEFENSE (Unclean

14
15

Hands):

16

 Whether LegalZoom has engaged in inequitable conduct

17

 Whether LegalZoom’s inequitable conduct relates directly to the subject
matter of its claims against Rocket Lawyer

18
19
20

ROCKET LAWYER’S SECOND AFFIRMATIVE DEFENSE (Laches,

21
22

Waiver, and/or Estoppel):
 Whether LegalZoom’s claims are barred by laches:

23
24

o Whether LegalZoom unreasonably delayed in bringing suit

25

o Whether LegalZoom’s delay prejudiced Rocket Lawyer

26

o Whether LegalZoom has acquiesced in the conduct about which it
complains

27

 Whether LegalZoom waived its claims:

28

43
FINAL PRETRIAL CONFERENCE ORDER
964079.3

o Whether LegalZoom possessed the right to bring its claims against

1

Rocket Lawyer

2

o Whether LegalZoom possessed actual or constructive knowledge

3

of its right to bring its claims against Rocket Lawyer

4

o Whether LegalZoom expressly released and discharged the right to

5
6

such claims, or engaged in conduct so inconsistent with any intent

7

to bring such claims as to induce Rocket Lawyer’s reasonable

8

belief that the right had been relinquished.

9

 Whether LegalZoom is estopped from bringing its claims:

10

o Whether LegalZoom knew the facts relevant to its claims;

11

o Whether LegalZoom acted in such a way that Rocket Lawyer had
a right to believe LegalZoom would not bring those claims;

12

o Whether Rocket Lawyer did not know that LegalZoom planned to

13

bring its claims; and

14

o Whether Rocket Lawyer relied on LegalZoom’s conduct to its

15

detriment

16
17

LEGALZOOM contends the following additional issues remain:

18

 Whether any delay in filing suit caused “material” prejudice to Rocket

19

Lawyer

20

 LegalZoom does not agree that “acquiescence” is an issue for trial on

21

this defense

22
23

ROCKET LAWYER’S THIRD AFFIRMATIVE DEFENSE (No Harm):

24
25

 Whether LegalZoom has failed to demonstrate any actual injury

26

 Whether LegalZoom has failed to demonstrate that any injury suffered
resulted from Rocket Lawyer’s advertisements

27

LEGALZOOM contends the following additional issues remain:

28

44
FINAL PRETRIAL CONFERENCE ORDER
964079.3

 LegalZoom objects that these elements do not apply to the affirmative

1

defense which was actually pled by Rocket Lawyer

2

 As to a defense based on “lack of harm,” the district court may award

3
4

LegalZoom any just monetary award so long as it constitutes

5

compensation for LegalZoom’s losses or Rocket Lawyer’s unjust

6

enrichment. 15 U.S.C. § 1117(a).

7
8

ROCKET LAWYER’S FOURTH AFFIRMATIVE DEFENSE (No

9
10

Likelihood of Confusion):
 Whether LegalZoom has failed to demonstrate that any of Rocket

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Lawyer’s advertisements at issue had a tendency to deceive a significant

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segment of the intended audience

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9.

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The parties have agreed that the following issues are no longer before the court:
 Any request for “damages” based on California Business and Professions Code
§17200;
 Each party’s request for punitive damages
 LegalZoom’s Affirmative Defense No. 1, 3-5.
 Rocket Lawyer’s Affirmative Defenses of:
o Failure to State a Claim;

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o Punitive Damages Unavailable;

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o Damages Unavailable for FAL Claim; and

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o Lack of Standing)

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The Parties have also agreed that Rocket Lawyer’s expert, Professor Jerry

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STIPULATIONS ON CLAIMS AND ISSUES

Wind, is only available to testify on December 15, 2014 under the current schedule.
LegalZoom’s expert, Dr. Bruce Isaacson, is also only available to testify December
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15 or 16. Alisa Weiner is also only available to testify on December 12, 2014.

2

STATUS OF DISCOVERY

3

10.

4

LegalZoom’s Position:

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LegalZoom contends that Rocket Lawyer unfairly delayed in producing key

6

documents and also has continued to withhold from production other key documents

7

previously requested by LegalZoom in discovery. For example, Rocket Lawyer has

8

only produced three of six usability studies conducted by Dr. Elizabeth Ferguson and

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has withheld from discovery certain key documents, including videotapes, which

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Rocket Lawyer had previously agreed to produce and which evidence Rocket

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Lawyer’s intention to engage in false advertising. LegalZoom contends that the

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withholding of these documents has compromised LegalZoom’s ability to notice and

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take all appropriate depositions and to prepare fully and fairly for trial.

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Rocket Lawyer’s Position:

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Rocket Lawyer disagrees with the contention that it has improperly withheld

16

documents. At the outset of this matter, the parties negotiated search terms and

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custodians to search to be applied to their documents in preparation for review and

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production. Rocket Lawyer adopted nearly all of LegalZoom’s search terms in

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addition to those it proposed, thus applying approximately 70 search terms. Rocket

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Lawyer applied the search terms to documents collected from the agreed to

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custodians, and reviewed documents that were responsive to LegalZoom’s requests

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for productions subject to Rocket Lawyer’s objections. Over the course of this

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litigation, Rocket Lawyer has produced over 38,000 documents including data pulls

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relating to the its search engine advertisements.

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LegalZoom, on the other hand, has, among other discovery abuses:

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 Produced approximately 2,100 documents and has refused to produce data
relating to its advertisements;

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 It has refused to search for and produce documents relating to its business

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formation and free advertisements, despite Rocket Lawyer’s unclean hands

2

defense;

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 It has refused to produce documents relied upon by its experts;

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 Revealed that it may not have issued a litigation hold or taken steps to
preserve documents;

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 Refused to produce documents identified at the depositions of its witnesses;

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and

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 Violated the protective order by publicly disclosing Rocket Lawyer’s

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confidential, proprietary information.

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At this stage, discovery is complete except that Rocket Lawyer intends to rebut

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11

the damages opinion disclosed on October 6, 2014, and provide a damages opinion

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for its counterclaims based on evidence revealed for the first time at the depositions of

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LegalZoom’s witnesses that were held between October 3 and 9, 2014. Rocket

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Lawyer intends to disclose this rebuttal report and its position on damages on or

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before November 5, 2014, thirty days after it received LegalZoom’s new damages

16

opinion and less than thirty days after it obtained information necessary to its

17

damages calculation that was withheld by LegalZoom. LegalZoom also served an

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untimely supplemental expert report from their expert Bruce Isaacson on October 27,

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2014. Rocket Lawyer reserves the right to serve a rebuttal to this report if necessary.
EXHIBIT LISTS

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11.

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All disclosures under Fed. R. Civ. P. 26(a)(3) have been made.

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The joint exhibit list of the parties has been filed under separate cover as

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required by L.R. 16-6.1. The Pre-trial Exhibit Stipulation has been filed under

24

separate cover as required by Paragraph 13 of the Court’s Scheduling Order, dated

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March 8, 2013. Unless all parties agree that an exhibit shall be withdrawn, all

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exhibits will be admitted without objection at trial, except those exhibits to which a

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party has lodged objections, as provided in the exhibit list filed pursuant to L.R. 16-

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6.1 and attached hereto as Exhibit A.
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WITNESS LISTS

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12.

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Witness lists of the parties have been filed with the Court.

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Only the witnesses identified in the lists will be permitted to testify (other than

4

solely for impeachment ).
Each party intending to present evidence by way of deposition testimony will

5
6

be marked such depositions in accordance with L.R. 16-2.7. For this purpose, the

7

following depositions will be lodged with the Clerk as required by L.R. 32-1:

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 All witnesses are currently expected to appear for trial.
In the event that a witness that is currently available becomes unavailable, the

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10

parties agree that notice of unavailability shall be provided in a sworn writing as soon

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as possible, but no later than 9:00 a.m. two business days before the start of trial or, if

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the witness becomes unavailable after the start of trial, by 9:00 a.m. two business days

13

before the day the witness is supposed to testify.
PENDING MOTIONS

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13.

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The following law and motion matters and motions in limine, and no others, are

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pending or contemplated:
As of October 28, 2014, the Court’s decision on the parties’ respective motions

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18

for summary judgment and partial summary judgment remains pending.

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LegalZoom will file motions in limine to exclude/preclude:

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1.

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Rocket Lawyer from calling witnesses to testify at trial and/or documents

that were not disclosed pursuant to FRCP 26.
2.

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Rocket Lawyer from using documents and/or testimony to impeach the

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usability studies that Rocket Lawyer commissioned from Dr. Ferguson and Google

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Ventures.
3.

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26

Legalspring.com website and Rocket Lawyer’s claims about that web site.
4.

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Rocket lawyer from producing evidence of any damages based on the
Rocket Lawyer from producing any market research or survey evidence

showing that any consumers were deceived or misled by the Legalspring.com
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website, other than evidence of statements made at the website itself.
5.

2

Daubert motion to exclude Dr. Wind’s expert opinions.

3
4

Rocket Lawyer intends to file the following motions in limine:

5

1.

A motion for evidentiary sanctions based on LegalZoom’s discovery

6

abuse, requesting an adverse inference, issue preclusion, precluding LegalZoom from

7

introducing evidence relating to topics to which it refused to produce evidence, and

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any other relief deemed appropriate by the Court.

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2.

Daubert motions to exclude LegalZoom’s expert witnesses.

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3.

Motion to exclude usability studies as inadmissible hearsay and because

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their probative value is outweighed by their prejudicial effect.

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4.

Motion to limit LegalZoom’s damages evidence and testimony.

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5.

Motion to exclude witnesses not disclosed pursuant to Rule 26.

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14.

BIFURCATED ISSUES

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Not applicable.

17

15.

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Rocket Lawyer requests, during testimony relating to the usability studies, a

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closed courtroom and that LegalZoom’s representative and witnesses be excluded.

20

LegalZoom’s Position: LegalZoom opposes this request. The public has an

21

interest in seeing these documents, and they are not privileged. The only basis for

22

excluding them is to hide from the public the fact that Rocket Lawyer has knowingly

23

engaged in a pattern and practice of false and deceptive advertising. Bad facts do not

24

justify excluding the public from being able to view those bad facts.

14

CONFIDENTIALITY

CONCLUSION

25

16.

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The foregoing admissions having been made by the parties, and the parties

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having specified the foregoing issues remaining to be litigated, this Final Pretrial

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Conference Order shall supersede the pleadings and govern the course of the trial of
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FINAL PRETRIAL CONFERENCE ORDER
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this cause, unless modified to prevent manifest injustice.

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3

Dated: November __, 2014

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6

UNITED STATES DISTRICT JUDGE

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8

Approved as to form:

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DATED: October 28, 2014

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GLASER WEIL FINK HOWARD AVCHEN &
SHAPIRO LLP
By: /s/ Fred D. Heather
PATRICIA GLASER
FRED HEATHER
AARON ALLAN
Attorneys for Plaintiff
LEGALZOOM.COM, INC.

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DATED: October 28, 2014

GOODWIN PROCTER LLP
By: /s/ Michael T. Jones
FORREST A. HAINLINE III
MICHAEL T. JONES
HONG-AN VU
BRIAN COOK
Attorneys for Defendant and
Counter-Claimant
ROCKET LAWYER INCORPORATED

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