Sign Designs, Inc. v. Gay et al

Filing 17

MEMORANDUM and ORDER signed by Judge Morrison C. England, Jr on 4/21/11 GRANTING 9 Motion to Remand and to Award Attorney's Fees; CASE REMANDED to Superior Court of California, County of San Joaquin. Copy of remand order sent. Dft Calcraft is ordered to pay pltf's attorney the sum of $6,175.00 within 20 days. CASE CLOSED. (Manzer, C)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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SIGN DESIGNS, INC.,

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No. 2:11-cv-00313-MCE-KJN

Plaintiff,
MEMORANDUM AND ORDER

v.
JOHNSON UNITED, INC., dba
UNITED SIGN SYSTEMS; CHARLES
GAY; ANDREW SOARES; BRIAN
CAMPBELL; CALCRAFT
CORPORATION,

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Defendants.

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----oo0oo----

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Through this action, Plaintiff Sign Designs (“Plaintiff”)
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seeks redress from Defendants pursuant to state law and the
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Lanham Act1 for the alleged misappropriation of its trade secrets.
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Plaintiff originally filed the action in San Joaquin County
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Superior Court on June 3, 2008.

On February 2, 2011, more than

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two and a half years later, Defendant Calcraft Corporation
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(“Calcraft”), citing federal question jurisdiction, removed the
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action to this Court.
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Codified at 15 U.S.C. § 1125(a).
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Presently before the Court is Plaintiff’s Motion to Remand and

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For Attorney’s Fees.

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Plaintiff contends that removal was untimely.

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set forth below, Plaintiff’s motion is granted.2

(ECF No. 9.)

In support of its motion,
For the reasons

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BACKGROUND3

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Plaintiff is a California corporation in the business of
designing, manufacturing, and selling signs.

Plaintiff alleges

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that, while employed by Plaintiff, Defendants Charles Gay and

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Andrew Soares acquired design drawings and photographs belonging

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to Plaintiff.

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Mr. Gay and Mr. Soares, thereby gaining access to the design

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drawings and photographs.

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the design drawings and photographs to conceal their origin, and

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sold them to customers falsely representing them as its own.

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Calcraft also purportedly used the design drawings and

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photographs during the course of its business without proper

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attribution to Plaintiff.

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Defendant United Sign Systems (“USS”) later hired

According to Plaintiff, USS altered

On February 22, 2010, Plaintiff filed the First Amended

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Complaint (“FAC”) in state court.

The Third Cause of Action pled

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in the FAC specifically involves the Lanham Act and is captioned

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“Lanham Act: False Designation of Origin - 15 U.S.C. § 1125(a).”

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Because oral argument will not be of material assistance,
the Court orders this matter submitted on the briefs. E.D. Cal.
Local Rule 230(g).
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The factual assertions in this section are based on the
allegations in Plaintiff’s Second Amended Complaint unless
otherwise specified.
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Plaintiff’s Lanham Act claim alleges so-called “reverse passing

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off” in claiming that Defendants wrongfully misappropriated

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Plaintiff’s designs, altered them to conceal their true origin,

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then passed off the designs as their own.

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Calcraft filed a demurrer to the FAC, specifically responding to

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the Lanham Act claim.

On March 23, 2010,

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On May 27, 2010, Plaintiff filed the Second Amended

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Complaint (“SAC”), again expressly purporting to state a claim

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for reverse passing off pursuant to the Lanham Act.

Like its

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predecessor, the SAC specifically captions its Third Cause of

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Action as being made under the Lanham Act.

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reiterates that Defendants “wrongfully misappropriated ...

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Plaintiff’s design drawings and photographs ... (a) altered them

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to conceal their true origin, (b) used them to unlawfully solicit

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Plaintiff’s customers ... and (c) sold them to those customers

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falsely designating their origin.”

Moreover, the SAC

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On January 4, 2011, Plaintiff served Calcraft with an

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interrogatory response alleging that USS had bid on signage jobs

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using “design drawings and/or feature of those drawings ...

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copied with only slight modification from the design drawings

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prepared and/or photographs taken by [Plaintiff].”

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Interrog. Resp. 4.)

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articulated in both the FAC and the SAC, Calcraft contends that

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the interrogatory response provides the first notice to

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Defendants that Plaintiff was pursuing a federal claim: namely, a

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claim made pursuant to the Federal Copyright Act.

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(Pl.’s

Despite the Lanham Act claim clearly

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On the basis of the January 4, 2011 interrogatory responses,

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which Calcraft contends triggered its right to remove this

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matter, Calcraft asserts that its subsequent February 2, 2011

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removal was timely.

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ANALYSIS

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A.

Motion To Remand

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It is fundamental that federal courts are courts of limited

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jurisdiction.

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1141, 1145 (9th Cir. 2006).

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presumption” against removal jurisdiction, and the defendant

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bears the burden of establishing that removal is proper.

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Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992).

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notice of removal must be filed within thirty days from the date

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the Defendant receives the initial complaint.

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§ 1446(b).

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is not removable, the notice of removal must be filed within

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thirty days of receipt of an amended pleading, notice, or other

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paper from which it can be ascertained that the case is

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removable.

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plaintiff pleads a colorable claim arising under the Constitution

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or laws of the United States.

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500, 513 (2006).

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Vacek v. United States Postal Serv., 447 F.3d
As a result, there is a “strong

Gaus v.

Generally, a

28 U.S.C.

However, if the case stated by the initial complaint

Id. Federal question jurisdiction is established if a

Arbaugh v. Y&H Corp., 546 U.S.

On February 22, 2010, Plaintiff filed the FAC.

As its Third

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Cause of Action in the FAC, Plaintiff expressly asserts a Lanham

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Act claim. (Notice of Removal ¶ 5.)

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also contains a claim made pursuant to the Lanham Act.
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The SAC, filed May 27, 2010,
Id.

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A claim arising under the Lanham Act states a federal question.

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Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996).

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did not file its Notice of Removal until February 2, 2011.

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Because the Notice of Removal was filed more than thirty days

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after both the FAC and the SAC, removal is defective if either

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amended complaint contains a colorable claim arising under the

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Lanham Act.

Calcraft

See 28 U.S.C. § 1446(b).

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Calcraft contends that the SAC does not assert a claim

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arising under the Lanham Act because the Lanham Act is preempted

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by the California Uniform Trade Secrets Act (“CUTSA”).

This

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argument is wholly unpersuasive and conflicts with fundamental

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precepts of constitutional law.

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Inc. v. Bank of America Technology and Operations, Inc. for the

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proposition that CUTSA preempts all non-contractual claims

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arising out of the same nucleus of operative fact.

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4th 939.

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preempt a federal statute.

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Organization, 441 U.S. 600, 612 (1979).

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stands only for the proposition that CUTSA preempts California

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common law arising out of the same nucleus of operative fact as

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the misappropriation of trade secrets claim.

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at 957.

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erroneous contention that CUTSA in any way preempts federal law.

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Calcraft next contends that removal was timely because

Calcraft cites K.C. Multimedia,

171 Cal. App.

However, it is fundamental that state law cannot
See Chapman v. Houston Welfare Rights
Further, K.C. Multimedia

171 Cal. App. 4th

There is absolutely no authority for Calcraft’s

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Plaintiff’s Lanham Act claim is clearly foreclosed by Supreme

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Court precedent, and is therefore not colorable.

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A claim is colorable unless it “is immaterial and made solely for

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the purpose of obtaining jurisdiction or is wholly insubstantial

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and frivolous.”

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(2006) (internal quotations omitted).

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“reverse passing off” claim pursuant to the Lanham Act arising

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out of the alleged theft, alteration, and resale of Plaintiff’s

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design drawings and photographs by Defendants without properly

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attributing their origin to Plaintiff.

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See Arbaugh v. Y&H Corp., 546 U.S. 500, 513 n.10
Plaintiff asserts a

Plaintiff’s ability to succeed on the merits of its Lanham

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Act claim may indeed ultimately be foreclosed by a recent Supreme

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Court decision.

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Corp., Fox brought a reverse passing off claim pursuant to the

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Lanham Act after Dastar edited videotapes in the public domain,

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originally produced by Fox, and sold them without stating their

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origin.

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bring a Lanham Act claim, the Supreme Court held that a reverse

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passing off claim is limited to cases involving the failure to

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properly attribute the origin of tangible goods, as opposed to

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the origin of the ideas or communications the goods contain.

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at 32.

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claim for reverse passing off “would undoubtedly be sustained if

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[defendant] had bought some of [plaintiff’s] videotapes and

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merely repackaged them as its own.”

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In Dastar Corp. v. Twentieth Century Fox Film

539 U.S. 23 (2003).

In concluding that Fox could not

Id.

The Supreme Count nonetheless stated in dicta that a

Id. at 31.

Although Dastar may limit Plaintiff’s ability to ultimately

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succeed on the merits, Plaintiff’s reverse passing off claim is

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colorable, as it is not wholly insubstantial and frivolous.

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Reading the Complaint in a light most favorable to Plaintiff,

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Dastar is distinguishable.
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Plaintiff appears to be claiming that Defendants made no

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substantive change to the design drawings and photographs, merely

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altering them “to conceal their true origin.”

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result, Defendants arguably repackaged Plaintiff’s essentially

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unaltered tangible product, and sold it without attribution.

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This plausible reading of Plaintiff’s Complaint brings the

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instant case within the purview of the dicta in Dastar.

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Consequently, despite some skepticism of Plaintiff’s ability to

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ultimately succeed on the merits of its Lanham Act claim, the

(SAC ¶ 33.)

As a

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Court concludes that Plaintiff states a colorable claim arising

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under federal law in the FAC and the SAC.

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Further, removal is defective irrespective of whether the

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SAC states a colorable Lanham Act claim because the Plaintiff’s

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interrogatory response is not materially different from the

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allegations in the SAC.

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Defendants “wrongfully missapropriated” its design drawings and

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photographs.

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that Defendant “copied” Plaintiff’s design drawings and

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photographs with slight modification.

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instead of the phrase ‘wrongfully misappropriated’ does not

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fundamentally alter the character of the allegations contained in

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the SAC.

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interrogatory response, taken alone, establishes removal

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jurisdiction, both amended complaints necessarily do so as well.

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Consequently, Calcraft’s removal is defective whether or not the

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interrogatory response is sufficient to establish federal

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question jurisdiction.

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In the SAC, Plaintiff alleges that

In its interrogatory response, Plaintiff alleges

Use of the word ‘copied’

Therefore, even assuming, arguendo, that the

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B.

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Attorney’s Fees

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An order remanding a case “may require payment of just costs

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and actual expenses, including attorney’s fees, incurred as a

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result of the removal.”

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award attorney’s fees is left to the discretion of the Court.

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See Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005).

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Absent unusual circumstances, a court may not award attorney’s

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fees pursuant to § 1447(c) unless “the removing party lacked an

28 U.S.C. § 1447(c).

The decision to

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objectively reasonable basis for seeking removal.”

Id.

In the

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instant case, Calcraft lacked an objectively reasonable basis for

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seeking removal.

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face of the complaint, a cause of action arising under the Lanham

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Act.

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2010 that Plaintiff seeks relief pursuant to a claim arising

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under federal law.

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FAC challenging Plaintiff’s Lanham Act claim on March 23, 2010.

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Despite receiving notice of, and filing a dumurrer to,

Both the FAC and SAC explicitly state, on the

As a result, Calcraft had notice on or before February 22,

Further, Defendant filed a demurrer to the

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Plaintiff’s Lanham Act claim, Calcraft did not file notice of

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removal for almost a year.

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removal on February 2, 2011, which resulted in an April 25, 2011

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state court trial date being vacated.

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at this point despite having already requested and received a

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continuance of the original January 4, 2011 trial date from state

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court.

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for the timeliness of its notice of removal, the preemption of

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the Lanham Act by CUTSA, is wholly without merit.

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Calcraft finally gave notice of

Calcraft removed the case

Further, as detailed above, Calcraft’s central argument

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Finally, although Calcraft’s reliance on Dastar provides some

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support for the conclusion that Plaintiff may not be able to

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succeed on the merits of its Lanham Act claim, Plaintiff’s

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interrogatory response clearly does not alter the factual

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allegations made by Plaintiff in both the FAC and the SAC.

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Because those allegations gave rise to a colorable federal claim,

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on the basis of either the FAC or the SAC, Calcraft’s removal was

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clearly untimely.

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Since Calcraft lacked an objectively reasonable basis for

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removal, an award of attorney’s fees is proper.

Plaintiff

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requests an hourly rate of $250.00.

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with rates previously approved by this Court.

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of the total hours spent as a result of the removal, however,

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Plaintiff includes 2.5 hours for travel time to, and attendance

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at, the hearing on this matter.

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hearing, Plaintiff’s request will be reduced by 2.5 hours to 24.7

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hours for a total of $6,175.00 in attorney’s fees.

That rate is commensurate
In its breakdown

Because the Court did not hold a

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CONCLUSION

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Based on the foregoing, Plaintiff’s Motion to Remand and to

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Award Attorney’s Fees (ECF No. 9) is hereby GRANTED pursuant to

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28 U.S.C. § 1447(c).

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originating state court, the Superior Court of California, County

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of San Joaquin, for final adjudication.

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The case is accordingly transferred to the

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Defendant Calcraft is ordered to pay Plaintiff’s attorney the sum

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of $6,175.00 not later than twenty (20) days following the date

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of this Memorandum and Order.

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close the case, subject to the Court’s continuing jurisdiction to

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ensure that the award of attorney’s fees is properly satisfied.

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The Clerk of Court is ordered to

IT IS SO ORDERED.
Dated: April 21, 2011

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_____________________________
MORRISON C. ENGLAND, JR.
UNITED STATES DISTRICT JUDGE

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