Entrepreneur Media Inc v. Eygn Limited Ernst & Young LLP et al

Filing 41

MEMORANDUM in Support of MOTION for Judgment on the Pleadings as to Lack of Subject Matter Jurisdiction 40 filed by Defendant Ernst & Young Advisory Inc. (Donahue, David)

1 Craig S. Mende, admitted pro hac vice
David A. Donahue, admitted pro hac vice
2 Betsy Judelson Newman, admitted pro hac vice
Grace W. Kang, admitted pro hac vice
3 FROSS ZELNICK LEHRMAN & ZISSU, P.C.
866 United Nations Plaza
4 New York, New York 10017
Telephone: [phone]
5 Facsimile: [phone]
6 James H. Berry, Jr. (State Bar No. 075834)
Kevin R. Lussier (State Bar No. 143821)
7 BERRY & PERKINS
A Professional Corporation
8 2049 Century Park East, Suite 950
Los Angeles, California 90067-3134
9 Telephone: [phone]
Facsimile: [phone]
10
Counsel for Defendant Ernst & Young Advisory Inc.
11
THE UNITED STATES DISTRICT COURT
12
FOR THE CENTRAL DISTRICT OF CALIFORNIA
13
ENTREPRENEUR MEDIA, INC.,
Case No. SACV08-0608 DOC
14
(MLGx)
Plaintiff,
15
vs.
16
MEMORANDUM OF POINTS AND
EYGN Limited, ERNST & YOUNG
AUTHORITIES IN SUPPORT OF
17 LLP and ERNST & YOUNG
ADVISORY INC.,
ERNST & YOUNG ADVISORY
18
INC.’S MOTION FOR JUDGMENT
Defendants.
ON THE PLEADINGS FOR LACK
19
OF SUBJECT MATTER
20 EYGN Limited and ERNST &
JURISDICTION
YOUNG LLP,
21
Date: December 22, 2008
Counterclaim-Plaintiffs,
Time: 8:30 a.m.
22
Courtroom: 9D
vs.
Judge: Honorable David O. Carter
23
24 ENTREPRENEUR MEDIA, INC., a
New York corporation,
25
Counterclaim-Defendant.
26
27
28
SACV08-0608 DOC (MLGX)
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ERNST & YOUNG ADVISORY INC.’S MOTION

{F0371135.9 }

TABLE OF CONTENTS
1
2 Preliminary Statement ................................................................................................. 1
3 Statement of Facts........................................................................................................ 2
4

A.

Nature of the Alleged Controversy.............................................................. 2

5

B.

Limited Allegations Concerning EYAI....................................................... 3

6 ARGUMENT............................................................................................................... 4
7
8

A.

Standard for Subject Matter Jurisdiction..................................................... 5

B.

There is No Justiciable Controversy Between EMI and EYAI
Pleaded on the Face of the Complaint......................................................... 6

C.

In the Alternative, the Undisputed Facts Mandate Dismissal of the
Complaint Against EYAI ............................................................................ 7

9
10
11
12

Conclusion ................................................................................................................... 8

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TABLE OF AUTHORITIES
1

FEDERAL CASES

2 Baker v. Carr, 369 U.S. 186, 82 S. Ct. 691,
3

7 L. Ed. 2d 663 (1962) ........................................................................................... 5

4 Doe v. Schachter, 804 F. Supp. 53 (N.D. Cal. 1992) .................................................. 5
5 Friends of Frederick Seig Grove # 94 v. Sonoma County Water Agency,
6

124 F. Supp. 2d 1161 (N.D. Cal. 2000) ................................................................. 5

7 Fujitsu Ltd. v. Nanya Technology Corp., No. 06 CV 6613,
8

2008 WL 3539503 (N.D. Cal. Aug. 12, 2008)....................................................... 8

9 Hawaii Management Alliance Association v. Schmidt, No. 07 CV 00593,
10

2008 WL 4107988 (D. Haw. Sept. 5, 2008) .......................................................... 6

11 Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270,
12

61 S. Ct. 510, 85 L. Ed. 826 (1941) ....................................................................... 5

13 Milne v. Slesinger, Inc., No. 02 CV 8508,
14

2003 U.S. Dist. LEXIS 7942 (C.D. Cal. May 8, 2003) ......................................... 7

15 Morongo Band of Mission Indians v. California State Board of Equalization,
16

858 F.2d 1376 (9th Cir. 1988)................................................................................ 5

17 SanDisk Corp. v. Audio MPEG, Inc., No. 06 CV 02655,
18

2007 WL 30598 (N.D. Cal. Jan 3, 2007) ............................................................... 8

19 Snell v. Cleveland, Inc., 316 F.3d 822 (9th Cir. 2002)................................................ 5
20 Societe de Conditionnement en Aluminum v. Hunter Engineering Co.,
21

655 F.2d 938 (9th Cir. 1981).............................................................................. 5, 7

22 Stock West, Inc. v. Confederated Tribes of Colville Reservation,
23

873 F.2d 1221 (9th Cir. 1989) ................................................................................ 6

24 Thornhill Publishing Co. v. General Telephone & Electronics Corp.,
25

594 F.2d 730 (9th Cir. 1979).................................................................................. 7

26
27
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FEDERAL STATUTES
1 28 U.S.C. § 2201.......................................................................................................... 5
2
3

FEDERAL RULES

4 FED. R. CIV. P. 12(b) .................................................................................................... 6
5 FED. R. CIV. P. 12(c) ............................................................................................ 1, 6, 7
6 FED. R. CIV. P. 12(h) .................................................................................................... 5
7

MISCELLANEOUS

8 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure
9

(3d ed. 2004)........................................................................................................... 6

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SACV08-0608 DOC (MLGX)
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ERNST & YOUNG ADVISORY INC.’S MOTION

Defendant Ernst & Young Advisory Inc. (“EYAI”) submits this memorandum

1

2 of points and authorities and the accompanying declarations of Doris Stamml, dated
3 October 29, 2008 (“Stamml Decl.”) and Craig S. Mende, dated November 12, 2008
4 (“Mende Decl.”), in support of its motion for judgment on the pleadings for lack of
5 subject matter jurisdiction pursuant to Rule 12(c) of the Federal Rules of Civil
6 Procedure (“Fed. R. Civ. P.”).
Preliminary Statement

7

In this declaratory judgment action, plaintiff Entrepreneur Media Inc.

8

9 (“EMI”) alleges the existence of a trademark dispute with defendants EYGN
10 Limited (“EYGN”) and Ernst & Young LLP (“Ernst & Young”) – not with
11 defendant EYAI. Because there is no dispute between EMI and EYAI, there is no
12 subject matter jurisdiction over EMI’s claims against EYAI.
Specifically, this action was filed shortly after EYGN issued two cease and

13

14 desist demands which, according to EMI, constituted a “thinly veiled threat of
15 litigation …” (Compl. ¶ 1.) EMI’s complaint seeks a declaration that: (1) the
16 federally registered ENTREPRENEUR OF THE YEAR mark owned by EYGN and
17 used in the United States under license by Ernst & Young is invalid; (2) the federal
18 registration for that mark should be cancelled; and/or (3) EMI’s use of the mark
19 preceded by the words “Entrepreneur® Magazine’s” in connection with its own
20 contest and awards program is non-infringing. (Id.) In addition to naming
21 defendants EYGN (the trademark owner) and Ernst & Young (its U.S. licensee that
22 conducts a contest under the ENTREPRENEUR OF THE YEAR mark), EMI also
23 named EYAI, a Canadian corporation that is registered to do business in California.
24 (Id. ¶¶ 3-4; see also Stamml Decl. ¶¶ 2, 4.) However, EYAI has never used the
25 ENTREPRENEUR OF THE YEAR mark and has never asserted or threatened to
26 assert any claims against EMI relating to that mark. (Stamml Decl. ¶¶ 5-6.) Thus, it
27
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SACV08-0608 DOC (MLGX)
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ERNST & YOUNG ADVISORY INC.’S MOTION

1 appears that EYAI was named as a defendant solely to support EMI’s attempt to
2 usurp from EYGN and Ernst & Young their choice of a forum outside of
3 California.1 In any event, no actual, justiciable or substantial controversy exists
4 between EYAI and EMI, and therefore the Court is required to dismiss the action as
5 to EYAI for lack of subject matter jurisdiction.
Statement of Facts

6

Nature of the Alleged Controversy2

7

A.

8

EMI alleges that the dispute at issue in this action arose in May 2008 when

9 EYGN sent a cease and desist letter and follow-up email to EMI claiming trademark
10 rights in ENTREPRENEUR OF THE YEAR and demanding that EMI choose a
11 different name for its program. (Compl. ¶ 1.) EMI alleges specifically that
12 defendant EYGN claimed ownership of the ENTREPRENEUR OF THE YEAR
13 trademark and “threatened Plaintiff EMI with legal action for trademark
14 infringement .…” (Id. ¶ 3.)
The complaint references, quotes, cites and attaches a copy of the May 1,

15

16 2008 letter and May 16, 2008 email from EYGN’s outside counsel Susan Upton
17 Douglass in which, according to EMI’s allegations, “Ms. Douglass warned that
18 EYGN Limited would take legal action against Entrepreneur Magazine unless it
19 selected a different name for its awards program ....” (Id. ¶ 11 and Exs. A & B.)
20 EMI alleges that the correspondence from EYGN’s counsel
21
22

1

EYGN and Ernst & Young (not EYAI) filed a parallel suit against EMI, Case No.
08 CV 6734, in the Southern District of New York. (Mende Decl. ¶ 8 and Ex. 3.)
23
The procedural history is set forth in greater detail in the accompanying Motion for
24 Judgment on the Pleadings or, in the Alternative, to Transfer filed by defendant
Ernst & Young.
25
2
Without addressing the truth of the allegations in the complaint, EYAI sets them
26 forth as pleaded to show that, even if true, they fail to establish subject matter
jurisdiction with respect to the claims against EYAI. EYAI submits herewith the
27 Declaration of Doris Stamml solely to provide information that would be relevant to
the event that, notwithstanding the foregoing,
28 the motion in is alleged in the complaint may be pertinent to the Court finds that facts
beyond what
the motion.
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1

created in Plaintiff a real and reasonable apprehension that

2

EMI would be subject to a lawsuit if it continued to

3

advertise and otherwise promote its “Entrepreneur

4

Magazine’s 2008 Entrepreneur® OF THE YEAR” and

5

“Entrepreneur Magazine’s 2008 Emerging Entrepreneur®

6

OF THE YEAR” contest and awards program for

7

outstanding entrepreneurs.

8 (Id. ¶ 13.)
B.

9

Limited Allegations Concerning EYAI

The only allegation in the complaint specifically addressing EYAI concerns

10

11 EYAI’s presence in California. The allegation states, in its entirety:
12

Plaintiff is informed and believes and based thereon

13

alleges that Defendant Ernst & Young Advisory Inc. is an

14

affiliate of EYGN Limited, has a California presence, and

15

is registered to do business in California. Plaintiff is

16

informed and believes and based thereon alleges that

17

Defendant Ernst & Young Advisory Inc. otherwise has

18

substantial contacts within this judicial district.

19 (Id. ¶ 4.)3
In some places, rather than consistently referring to the mark as EYGN’s, the

20

21 complaint imprecisely refers to “Defendants’ registered ‘Entrepreneur of the Year’
22 trademark,” or “Defendants’ registered trademark[] … for ENTREPRENEUR OF
23 THE YEAR, Reg. No. 1,587,164.” (Compl. ¶ 1 and n.1 (emphasis added); accord
24 id. ¶¶ 14-16, 20, 29.) Likewise, while EMI alleges specifically and repeatedly that
25 the May 2008 cease and desist demands were issued by “Defendant EYGN Limited”
26
27

3

In fact, EYGN is not an “affiliate of EYGN Limited” as Plaintiff alleges. (Stamml
Decl. ¶ 3.)
28
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1 (see id. ¶¶ 1, 3, 11), elsewhere the complaint refers to “Defendants’ May 1, 2008
2 letter and May 16, 2008 e-mail,” the objections of “Defendants,” and “Defendants’”
3 attempt to prevent unauthorized use of its mark. (See id. ¶¶ 2, 19, 23.) However,
4 photocopies of the cease and desist correspondence and a United States Patent and
5 Trademark Office print-out for the ENTREPRENEUR OF THE YEAR registration
6 attached at Exhibits A and B to the complaint remove any ambiguity; they confirm
7 that EYAI does not own the federal registration at issue and did not issue any
8 demands or threats to EMI. (See id. Exs. A & B.)
The complaint also references a statement in the May 1, 2008 cease and desist

9

10 letter from EYGN’s counsel that “The ENTREPRENEUR OF THE YEAR mark is
11 licensed by EYGN Limited to member firms of the Ernst & Young global
12 organization,” including defendant “Ernst & Young LLP.” (Id. ¶ 19 and Ex. A.)
13 EMI alleges that “[s]uch contracts and agreements between EYGN Limited and its
14 various Ernst & Young affiliates constitute the wrongful use of the claimed
15 ‘Entrepreneur of the Year’ trademark in restraint of trade or commerce” under
16 United States antitrust laws. (Id. ¶ 19.) However, EMI does not allege that EYAI
17 ever claimed rights in or used the ENTREPRENEUR OF THE YEAR mark in the
18 United States or elsewhere, and EYGN’s May 1, 2008 letter does not indicate in any
19 way that EYAI uses the ENTREPRENEUR OF THE YEAR mark in the United
20 States or elsewhere. (See id. Ex. A.) In fact, EYAI does not. (Stamml Decl. ¶ 5.)4
Argument

21

EMI has alleged that the May 2008 EYGN cease and desist demands

22

23 regarding the ENTREPRENEUR OF THE YEAR mark constituted a threat
24 sufficient to create a justiciable controversy. (See Compl. ¶ 1.) But that threat did
25
26

4

The Stamml Declaration also confirms that EYAI’s principal place of business is
located in Toronto; that EYAI has never used the ENTREPRENEUR OF THE
27 YEAR mark; and that EYAI has never contacted or communicated with EMI
28 regarding use of or rights in that mark. (Stamml Decl. ¶¶ 1, 5-6.)
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1 not – and could not – come from EYAI – because EYAI (1) has never used the
2 ENTREPRENEUR OF THE YEAR mark in the United States or elsewhere, and (2)
3 has never contacted or communicated with EMI regarding use of or rights in such
4 mark. (Stamml Decl. ¶¶ 5-6.) EMI has failed to adequately allege any controversy
5 with EYAI in its pleadings (see Pt. B below), and the undisputed evidence confirms
6 that no controversy actually exists between EMI and EYAI (see Pt. C below).
7 Therefore, the Court must dismiss EYAI from this action for lack of subject matter
8 jurisdiction.
A.

9

Standard for Subject Matter Jurisdiction

Lack of subject matter jurisdiction is a defense that cannot be waived by the

10

11 actions of a defendant, see Fed. R. Civ. P. 12(h)(1) and (3), and may be raised at
12 “any time during the pendency of the action.” Snell v. Cleveland, Inc., 316 F.3d
13 822, 826 (9th Cir. 2002). It is black-letter law that “[i]f the court determines at any
14 time that it lacks subject-matter jurisdiction, the court must dismiss the action.” Fed.
15 R. Civ. P. 12(h)(3) (emphasis added); accord Friends of Frederick Seig Grove # 94
16 v. Sonoma County Water Agency, 124 F. Supp. 2d 1161, 1164 (N.D. Cal. 2000).
17 Under both Article III of the United States Constitution and the Declaratory
18 Judgment Act (the “Act”)5, there is no subject matter jurisdiction absent a “case or
19 controversy” between the parties. Doe v. Schachter, 804 F. Supp. 53, 57 (N.D. Cal.
20 1992) (citing Baker v. Carr, 369 U.S. 186, 198, 82 S. Ct. 691, 700, 7 L. Ed. 2d 663
21 (1962)).6
22

5

The Act provides that “[i]n a case of actual controversy within its jurisdiction, . . .
23 any court of the United States, upon the filing of an appropriate pleading, may
declare the rights and other legal relations of any interested party seeking such
24 declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201.
As such, it “merely creates a remedy in cases otherwise within the court’s
25 jurisdiction; it does not constitute an independent basis for jurisdiction.” Morongo
Band of Mission Indians v. Cal. State Bd. of Equalization, 858 F.2d 1376, 1382-83
26 (9th Cir. 1988) (internal citation omitted).
6

This means that, for the Court to retain jurisdiction, there must be a “substantial
controversy, between parties having adverse legal interests, of sufficient immediacy
28 and reality to warrant the issuance of a declaratory judgment.” Societe de
Conditionnement en Aluminum v. Hunter Eng’g Co., 655 F.2d 938, 942 (9th Cir.
27

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1

Where, as here, “a party raises an issue as to the court’s subject matter

2 jurisdiction on a motion for a judgment on the pleadings [under Rule 12(c)], the
3 district judge will treat the motion as if it had been brought under Rule 12(b)(1).”
4 5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure
5 § 1367 at 221 (3d ed. 2004); see also Hawaii Mgmt. Alliance Ass’n v. Schmidt, No.
6 07 CV 00593, 2008 WL 4107988, at *2 (D. Haw. Sept. 5, 2008) (applying Rule
7 12(b)(1) standard to a motion for judgment on the pleadings brought under Rule
8 12(c)). As such, the plaintiff bears the burden of proving that subject matter
9 jurisdiction exists when challenged. Stock W., Inc. v. Confederated Tribes of
10 Colville Reservation, 873 F.2d 1221, 1225 (9th Cir. 1989).
11

Because there is no controversy between EMI and EYAI – let alone a

12 “substantial” controversy – subject matter jurisdiction is lacking and the claims
13 against EYAI must be dismissed.
14
15
16

B.

There is No Justiciable Controversy Between EMI and EYAI
Pleaded on the Face of the Complaint

EMI, which brought this action in response to demand letters from defendant

17 EYGN, seeks cancellation of defendant EYGN’s federal registration for
18 ENTREPENEUR OF THE YEAR, and a declaration that EMI is not infringing
19 EYGN’s mark. (See Compl. ¶ 1.) But EMI’s assertion of subject matter jurisdiction
20 over its claims for declaratory relief against EYAI is deficient on its face. EMI does
21 not allege that EYAI (1) has claimed rights in the ENTREPRENEUR OF THE
22 YEAR mark in the United States; (2) owns a registration for the mark in the United
23 States; or (3) has accused EMI of infringing that mark or threatened to take action
24 against EMI with respect to that mark. (See Compl.) Indeed, the only express
25
26
27

1981) (quoting Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273, 61 S.
28 Ct. 510, 512, 85 L. Ed. 826 (1941)) (internal quotations omitted).
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1 reference to EYAI in the entire complaint is an allegation that EYAI does business
2 in California – nothing more. (See id. ¶ 4.)7
Simply put, even with all allegations construed in EMI’s favor, EMI has

3

4 failed to allege any controversy with EYAI – let alone a “substantial controversy . . .
5 of sufficient immediacy” to confer jurisdiction on this Court over the subject matter
6 of EMI’s claims for declaratory relief against EYAI. See Societe de
7 Conditionnement en Aluminum, 655 F.2d at 942. Accordingly, the complaint must
8 be dismissed as against EYAI.
C.

9

In the Alternative, the Undisputed Facts Mandate Dismissal of the
Complaint Against EYAI

10

Even if EMI’s allegations could be reasonably construed to allege an actual

11

12 controversy between EMI and EYAI – which as shown in Pt. B. above, they cannot
13 – the undisputed facts mandate dismissal of the claims against EYAI for lack of
14 subject matter jurisdiction.
Where a motion challenges the actual existence of subject matter jurisdiction,

15

16 rather than merely the sufficiency of the pleadings alleging subject matter
17 jurisdiction, “[n]o presumptive truthfulness attaches to plaintiff’s allegations, and
18 the existence of disputed material facts will not preclude the trial court from
19 evaluating for itself the merits of jurisdictional claims.” Thornhill Publ’g Co. v.
20 Gen. Tel. & Elec. Corp., 594 F.2d 730, 733 (9th Cir. 1979). As set forth in the
21 declaration of EYAI’s Secretary, Ms. Stamml, EYAI has never used the
22 ENTREPRENEUR OF THE YEAR mark in the United States or elsewhere and has
23 never contacted or communicated with EMI regarding use of or rights in such mark.
24 (Stamml Decl. ¶¶ 5-6.) There is no dispute between EYAI and EMI concerning the
25

7

The correspondence attached to the complaint as Exhibits A and B also confirms
26 that the claims at issue are not directed to EYAI. See Milne v. Slesinger, Inc., No.
02 CV 8508, 2003 U.S. Dist. LEXIS 7942, at *9-*10 (C.D. Cal. May 8, 2003)
27 (under Rule 12(c), “the Court may consider pleadings, documents attached as
exhibits or incorporated by reference in the pleadings, and matters of which the
28 Court may take judicial notice”).
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1 ENTREPRENEUR OF THE YEAR mark or any variation of that mark in the
2 United States. (Id. ¶ 7.) As such, even if EMI had pleaded allegations that would
3 create the appearance of a controversy between EMI and EYAI, the claims against
4 EYAI would still have to be dismissed because the undisputed and indisputable facts
5 show that there is in reality no actual, justiciable or substantial controversy between
6 EMI and EYAI, and EMI cannot show otherwise. See Fujitsu Ltd. v. Nanya Tech.
7 Corp., No. 06 CV 6613, 2008 WL 3539503, at *3-*4 (N.D. Cal. Aug. 12, 2008)
8 (finding no actual controversy where defendant did not accuse plaintiff of
9 infringement); SanDisk Corp. v. Audio MPEG, Inc., No. 06 CV 2655, 2007 WL
10 30598, at *6 (N.D. Cal. Jan. 3, 2007) (same).
Conclusion

11
12

For the foregoing reasons, EYAI’s motion for judgment on the pleadings for

13 lack of subject matter jurisdiction should be granted.
14
15 DATED: November 12, 2008

Respectfully submitted,

16 BERRY & PERKINS,
A Professional Corporation
17

FROSS ZELNICK LEHRMAN & ZISSU, P.C.

18

By:____________________________
Craig S. Mende
[e-mail]
David A. Donahue
[e-mail]
Betsy Judelson Newman
[e-mail]
Grace W. Kang
[e-mail]
Phone: [phone]

19
20
21
22
23
24

Counsel for Defendant Ernst & Young
Advisory Inc.

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