Greenlight Financial Services Inc et al v. Internet Brands Inc et al

Filing 15

MINUTES (IN CHAMBERS): ORDER by Judge David O. Carter: granting 8 Motion to Dismiss. (MD JS-6. Case Terminated) (twdb)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No. SACV11-1671-DOC (MLGx)
Date: January 13, 2012
Title: GREENLIGHT FINANCIAL SERVICES, INC., ET AL. -V- INTERNET BRANDS, INC., ET AL.
PRESENT:
THE HONORABLE DAVID O. CARTER, JUDGE
Julie Barrera
Courtroom Clerk

Not Present
Court Reporter

ATTORNEYS PRESENT FOR PLAINTIFFS: ATTORNEYS PRESENT FOR DEFENDANTS:
NONE PRESENT

NONE PRESENT

PROCEEDING (IN CHAMBERS): ORDER (1) GRANTING DEFENDANTS’ MOTION TO
DISMISS CLAIMS TWO THROUGH TEN AND (2)
DISMISSING CLAIM ONE WITHOUT PREJUDICE TO
REFILING IN STATE COURT
Before the Court is Defendants’ Motion to Dismiss Claims 2-10 of the Complaint (Dkt.
8). The Court finds this matter appropriate for decision without oral argument. Fed. R. Civ. P. 78;
L.R. 7-15. Accordingly, the motion is REMOVED from the Court’s January 23, 2012 calendar.
After considering the moving, opposing and reply papers, and for the reasons stated
below, the Court hereby GRANTS the Motions to Dismiss (Dkt. 8). The Court also GRANTS
Defendants’ unopposed request for judicial notice (Dkt. 9).
I.

BACKGROUND

Since 2001, Plaintiff Greenlight Financial Services, Inc. (“Greenlight”) has become one
of the fastest growing direct mortgage lenders in the country and it continues to grow. (FAC ¶ 13.)
Plaintiff OTC Pacific, LLC (“OTC”) is the registered owner of federal trademark registration nos.
1,913,751 for GREENLIGHT and 3,174,694 for GREENLIGHT FINANCIAL SERVICES
(collectively, the “Greenlight Marks”). (Id. ¶ 12.) OTC has an exclusive license with Greenlight which
grants Greenlight the exclusive right to use and enforce the GREENLIGHT mark. (Id. ¶ 16.)
Plaintiffs allege that Defendants Internet Brands, Inc. dba Carsdirect.com (“IB”),
Carsdirect Mortgage Services, Inc. dba Loanstore.com (“CMS”) and CD1Financial.com, LLC (“CD1”)
MINUTES FORM 11 DOC
CIVIL - GEN

Initials of Deputy Clerk: jcb
Page 1 of 6

are in the internet marketing business and create and manage over one hundred websites that provide
advertisements for various goods, or offer goods or services to the public. (Id. ¶ 17.) Defendants own
the website www.greenlight.com. (Id. ¶ 18.)
In 2005, Greenlight sued Defendants in this Court in Case No. SA CV 05-545AHS(ANx) (“First Action”). In the First Action, Greenlight asserted claims for federal trademark
infringement under 15 U.S.C. §§ 1114, et seq., federal unfair competition and false designation of
origin under 15 U.S.C. § 1125(a), federal trademark dilution under 15 U.S.C. § 1125, registered
trademark infringement under Cal. Bus. & Prof. Code § 14335, injury to business reputation under Cal.
Bus. & Prof. Code § 14330, unfair competition and false designation of origin under Cal. Bus. & Prof.
Code §§ 17200 and 17500, illegal use of lender name in solicitation for financial services under Cal.
Civ. Code §§ 14700, et seq., common law unfair competition, common law trademark infringement,
and constructive trust. (Defs.’ Request for Judicial Notice (“RJN”) Ex. C, Complaint in First Action.)
After the Court granted Greenlight a preliminary injunction, the parties reached a
settlement and filed a joint request to dismiss all claims and the counterclaim in the First Action with
prejudice. (Defs.’ RJN Ex. C, Stipulation to Dismiss Action with Prejudice.) In the settlement
agreement, Greenlight agreed that Defendants would continue using Greenlight.com, but Defendants
would be required to display an introductory screen showing visitors how to get to Greenlight’s website
for financial services. Specifically, the introductory screen was to contain links to Autos.com,
LoanStore, and www.greenlightloans.com. (FAC ¶ 26.)
In the current action, Plaintiffs allege that in July 2011, they discovered that Defendants
were not using Greenlight.com in accordance with the terms of the parties’ settlement agreement. (Id. ¶
27.) Plaintiffs maintain that Defendants are now displaying advertising links on Greenlight.com that
are either in direct competition with Greenlight’s business or were so similar in descriptive services that
they would confuse the public away from Greenlight and Greenlight’s services. (Id. ¶ 29.) The instant
suit asserts claims for: (1) breach of contract based on breach of the settlement agreement, (2)
cybersquatting under 15 U.S.C. § 1125(d), (3) federal trademark infringement under 15 U.S.C. §§ 1114,
et seq., (4) federal unfair competition and false designation of origin under 15 U.S.C. § 1125(a), (5)
registered trademark infringement under Cal. Bus. & Prof. Code § 14335, (6) unfair competition and
false designation of origin under Cal. Bus. & Prof. Code §§ 17200 and 17500, (7) illegal use of lender
name in solicitation for financial services under Cal. Civ. Code §§ 14700, et seq., (8) common law
unfair competition, (9) common law trademark infringement, and (10) constructive trust. (Dkt. 1,
Complaint filed 11/1/2011.)
Defendants filed the instant motion seeking dismissal of Plaintiff’s second through tenth
causes of action on the grounds that they are barred by res judicata due to the Court’s dismissal with
prejudice of all claims in the First Action.

MINUTES FORM 11 DOC
CIVIL - GEN

Initials of Deputy Clerk: jcb
Page 2 of 6

II.

LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed when a
plaintiff’s allegations fail to state a claim upon which relief can be granted. Dismissal for failure to
state a claim does not require the appearance, beyond a doubt, that the plaintiff can prove “no set of
facts” in support of its claim that would entitle it to relief. Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955,
1968 (2007) (abrogating Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99 (1957)). In order for a
complaint to survive a 12(b)(6) motion, it must state a claim for relief that is plausible on its face.
Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009). A claim for relief is facially plausible when the
plaintiff pleads enough facts, taken as true, to allow a court to draw a reasonable inference that the
defendant is liable for the alleged conduct. Id. at 1949. If the facts only allow a court to draw a
reasonable inference that the defendant is possibly liable, then the complaint must be dismissed. Id.
Mere legal conclusions are not to be accepted as true and do not establish a plausible claim for relief.
Id. at 1950. Determining whether a complaint states a plausible claim for relief is a context-specific
task requiring the court to draw on its judicial experience and common sense. Id.
In evaluating a 12(b)(6) motion, review is “limited to the contents of the complaint.”
Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir. 1994). However, exhibits attached to the
complaint, as well as matters of public record, may be considered in determining whether dismissal was
proper without converting the motion to one for summary judgment. See Parks School of Bus., Inc. v.
Symington, 51 F.3d 1480, 1484 (9th Cir. 1995); Mack v. South Bay Beer Distribs., Inc., 798 F.2d 1279,
1282 (9th Cir. 1986). Further, a court may consider documents “on which the complaint ‘necessarily
relies’ if: (1) the complaint refers to the document; (2) the document is central to the plaintiff’s claim;
and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion.” Marder v.
Lopez, 450 F.3d 445, 448 (9th Cir. 2006). “The Court may treat such a document as ‘part of the
complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under
Rule 12(b)(6).” Id.
III.

DISCUSSION
A.

Res Judicata

Defendants argue that Plaintiffs’ third through tenth claims are identical to claims
dismissed with prejudice in the First Action. (Mot. at 7.) Defendants conclude that the dismissal with
prejudice bars Plaintiffs from re-adjudicating the same claims in the same court. (Id.) Defendants
further argue that Plaintiffs’ second claim for cybersquatting is barred by res judicata because it arises
from the same nucleus of operative facts as the First Action, and could have been brought in the First
Action. (Id.)
Plaintiffs oppose on the grounds that the settlement agreement that resolved the First
Action pertained to initial confusion, and the instant suit pertains to current willful infringement by
Defendants. (Opp’n at 3.) Plaintiffs argue that res judicata does not bar the new claims because the
new claims arise out of newly discovered facts and evidence, and thus could not have been brought in
MINUTES FORM 11 DOC
Initials of Deputy Clerk: jcb
CIVIL - GEN
Page 3 of 6

the First Action. (Id. at 6.) Plaintiffs contend that in contrast to the facts in the First Action,
Defendants definitely knew about Plaintiffs’ rights to the Greenlight Marks and they blatantly breached
the settlement agreement and willfully infringed upon the marks anyway. (Id.)
“[T]he doctrine of res judicata (or claim preclusion) ‘bar(s) all grounds for recovery
which could have been asserted, whether they were or not, in a prior suit between the same parties . . .
on the same cause of action.’” Costantini v. Trans World Airlines, 681 F.2d 1199, 1201 (9th Cir. 1982)
(quoting Ross v. IBEW, 634 F.2d 453, 457 (9th Cir. 1980)). To establish res judicata, the claims must
be the same, a final judgment on the merits must have been reached, and the parties must be in privity.
Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 322 F.3d 1064, 1077 (9th Cir. 2003).
In analyzing whether a cause of action in a new suit is different from that raised in an
earlier suit, the Ninth Circuit considers a number of factors, including: “‘(1) whether rights or interests
established in the prior judgment would be destroyed or impaired by prosecution of the second action;
(2) whether substantially the same evidence is presented in the two actions; (3) whether the two suits
involve infringement of the same right; and (4) whether the two suits arise out of the same transactional
nucleus of facts. Costantini, 681 F.2d at 1201-02 (quoting Harris v. Jacobs, 621 F.2d 341, 343 (9th
Cir. 1980)). “The last of these criteria is the most important.” Id.
Plaintiffs do not dispute that a judgment on the merits was entered in the First Action or
that the same parties are bound by the First Action. Instead, Plaintiffs argue that the claims raised in
the instant suit are new and different from those raised in the First Action and could not have been
brought at that time. The Court disagrees. The second through tenth claims in the instant action are
barred under the doctrine of res judicata because they were either asserted, or could have been asserted,
in the First Action.
First, the rights and interests established in the prior judgment would be impaired if
Plaintiffs are allowed to proceed on their new claims because identical claims raised by Plaintiffs were
dismissed with prejudice in the First Action. Compare Defs.’ RJN Ex. B, Complaint in First Action
with Dkt. 1, Complaint in this action. Plaintiffs’ current third through tenth claims were already alleged
in the First Action. Plaintiffs’ second claim for cybersquatting could have been alleged because it is
based on Defendants’ use of the Greenlight.com website, which Plaintiffs allege is in violation of their
rights in the Greenlight Marks. That is precisely the same dispute that spurred the filing of the First
Action.
Although Plaintiffs argue that their “new” claims arise out of new and different facts, a
review of the instant complaint reveals that this assertion is inaccurate. Each of the “new” trademarkbased claims is simply a repackaged version of an old claim that now cites to the alleged breach of the
settlement agreement. Plaintiffs conclude that breach of the agreement gives rise to various trademark
infringement claims due to the confusion caused by Defendants’ willful breach. However, stating that
each trademark-based claim arises from the recent breach of the settlement agreement does not make
each claim new and different from that alleged before. For example, Plaintiffs’ instant federal
trademark infringement claim alleges that Defendants’ use of the Greenlight Marks is in violation of the
MINUTES FORM 11 DOC
CIVIL - GEN

Initials of Deputy Clerk: jcb
Page 4 of 6

settlement agreement and is therefore infringing. (Compl. ¶ 62.) This allegation attempts to piggyback
an infringement claim on a breach of contract claim. Plaintiffs go on to state that Defendants’ use of
the marks is likely to cause confusion (id. ¶ 63), including initial interest confusion (id. ¶ 64).
Identically, Plaintiffs’ complaint in the First Action also stated a claim for federal trademark
infringement, which alleged that Defendants’ use of the Greenlight Mark caused confusion (First
Action Compl. ¶ 40), including initial interest confusion (id. ¶ 41).
Turning to the remaining factors, the evidence needed to prove the claims in both actions
pertains to Defendants’ use of Greenlight.com. Just because Defendants’ use of this website over time
may have been modified does not mean that new evidence will be presented here. If that argument was
persuasive, this factor would always point to “new” and different claims with the passage of time. As
stated previously, both actions arise out of Defendants’ alleged infringement of the Greenlight Marks,
as well as the same transactional nucleus of operative facts, namely how Defendants are using
Greenlight.com and whether this use infringes on the Greenlight Marks.
To the extent that Plaintiffs appear to argue that Defendants’ alleged breach of the
settlement agreement somehow wipes out certain terms of the agreement or the dismissal with
prejudice, the Court rejects this argument. The Court’s earlier dismissal with prejudice was clear, and
the settlement agreement waived all claims arising out of the dispute resolved by the agreement. The
Court notes that the agreement did not contain a provision that reserved the right to bring future
infringement-based claims based on modifications to Greenlight.com by Defendants. A review of
Plaintiffs’ remaining claims in the instant action reveals that they are all premised on breach of the
underlying settlement agreement, which is the only new and distinct claim raised by Plaintiffs. This
alleged breach, however, does not allow Plaintiffs’ to relitigate claims previously dismissed with
prejudice.
Because the Court finds that Plaintiffs’ second through tenth claims are barred by res
judicata, the Court need not reach Defendants’ statute of limitations or laches arguments.
The Court declines Plaintiffs’ request for leave to amend, which was not brought as a
properly noticed motion. Even if the request was properly before the Court, leave to amend would not
be appropriate in light of the Court’s res judicata findings. Although Plaintiffs request leave to amend
to clarify that they are only pursuing claims of willful trademark infringement from the date of the
breach of the settlement agreement, this assertion does not transform the previously dismissed claims
into new and different claims. Plaintiffs stipulated to the dismissal of their infringement-based claims
arising out of Defendants’ use of the Greenlight Marks on Greenlight.com in the First Action. (Dkt. 1,
Compl. Ex. 4 at ¶¶ 6-9.) Accordingly, amendment would be futile.
The Court hereby dismisses Plaintiffs’ second through tenth causes of action with
prejudice because they are barred by res judicata.

MINUTES FORM 11 DOC
CIVIL - GEN

Initials of Deputy Clerk: jcb
Page 5 of 6

B.

Remaining State Law Claim

Because the Court’s jurisdiction was premised on Plaintiffs’ Lanham Act claims, now that
Plaintiffs’ only remaining claim is for breach of contract, the case no longer arises under federal law.
Plaintiffs’ claim is rooted in state law and complete diversity does not exist among the parties. Because
no issues of federal law remain, the Court declines to exercise supplemental jurisdiction over Plaintiffs’
state law claim. Accordingly, the first cause of action for breach of contract is dismissed without
prejudice to refilling in state court.
VI.

DISPOSITION

For the reasons set forth above, the Court hereby GRANTS Defendants’ Motion to
Dismiss Plaintiffs’ second through tenth causes of action. Because the Court declines to exercise
supplemental jurisdiction, Plaintiffs’ first cause of action for breach of contract is DISMISSED without
prejudice to refilling in state court.
The Clerk shall serve this minute order on all parties to the action.

MINUTES FORM 11 DOC
CIVIL - GEN

Initials of Deputy Clerk: jcb
Page 6 of 6