Fotohaus, LLC v. Proforma, Inc. et al

Filing 43

ORDER GRANTING 28 FOTOHAUS'S MOTION TO DISMISS COUNTERCLAIM WITH PREJUDICE. Signed by Judge Beth Labson Freeman on 4/4/2019.(blflc2S, COURT STAFF) (Filed on 4/4/2019)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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FOTOHAUS, LLC,
Plaintiff,

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v.

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PROFORMA, INC., et al.,

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United States District Court
Northern District of California

Case No. 18-cv-01827-BLF

Defendants.

ORDER GRANTING FOTOHAUS’S
MOTION TO DISMISS
COUNTERCLAIM WITH PREJUDICE
[Re: ECF 28]

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Before the Court is Plaintiff Fotohaus, LLC’s (“Fotohaus”) motion to dismiss Defendant

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PFG Ventures, L.P.’s (“Proforma”) counterclaim for intentional interference with contractual

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relations. Mot., ECF 28. The Court held a hearing on the motion on March 21, 2019. As

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discussed below and as stated on the record at the hearing, because this counterclaim is barred by

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the California litigation privilege, the motion is GRANTED WITH PREJUDICE.

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I.

BACKGROUND1

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Fotohaus owns the copyright to the photograph entitled “Typing on a Laptop,” which was

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created by Daniel Foster, Fotohaus’s sole member and manager. Compl. ¶¶ 2, 34, 37. Sometime

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after August 31, 2014, Proforma and many of its franchisees (also defendants here),2 began

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Each parties’ well-pled factual allegations are accepted as true for purposes of the motion to
dismiss. See Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011).
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The Defendant Franchisees are Proforma Solutions For Printing & Promotions/Becky Diltz;
Proforma Meyer & Associates LLC; Graphic Printsource, Inc.; Proforma Premier Marketing;
Proforma Albrecht & Co./Bob Sanzenbacher; Kay Enterprises; Proforma 360 Branding/JKNA
Ventures LLC; Direct Effect Solutions, LLC d/b/a Proforma Direct Effect; Surf City Promo, LLC;
Professional Business Communication Solutions Inc. d/b/a Proforma Solutions; The Proforma
Group Inc. d/b/a Proforma Hi-Rez; Wine Country Dry Goods LLC, d/b/a Proforma Wine Country;
Print & Promotional Solutions, Inc. d/b/a Proforma SoCal; Proforma J.C.L. Print Associates, Inc.;
Proforma Salant Marketing Group/Joslin Salant; Proforma Marketing Solutions/Brian Thomas;
Pepper Promotions, Inc., d/b/a/ Proforma Pepper Promotions; Pacific Print and Promotions, LLC,
d/b/a/ Proforma Pacific Graphics; Buscom Inc. d/b/a Proforma 24/7; Proforma Printing
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displaying Typing on a Laptop allegedly on their websites. Id. ¶ 38, Ex. A. Proforma provided a

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website template to the Franchisees that incorporated Typing on a Laptop, and the Franchisees

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then used the template on their websites. Id. ¶¶ 38–44. Based on these actions, Fotohaus filed the

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instant suit on March 23, 2018, bringing the following causes of action: (1) Copyright

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Infringement (17 U.S.C. § 501(b)) (against Proforma and the Franchisees); (2) Contributory

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Copyright Infringement (17 U.S.C. § 501(b)) (against Proforma); (3) Violation of the Digital

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Millennium Copyright Act (17 U.S.C. § 1202(b)) (against Proforma). Id. ¶¶ 47–56. Proforma

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first received notice of its alleged infringement in a cease and desist letter from Fotohaus’s counsel

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dated March 26, 2018, three days after the filing of the Complaint. Id. ¶ 59.

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On October 8, 2018, Defendants answered the Complaint. Proforma filed a counterclaim

United States District Court
Northern District of California

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against Fotohaus for intentional interference with contractual relations, for interference in

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Proforma’s contractual relations with its Franchisees. See Ans. at 21, ECF 27. Specifically,

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Proforma alleges that the photograph appeared only on the Proforma.com website, over which

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only it, and not the Franchisees, had control. Ans. ¶¶ 21–27. As such, the Franchisees had no role

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in the use or display of the photograph in any way. Id. ¶¶ 28–32. Proforma claims that Fotohaus

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knew that the Franchisees did not have control over the Proforma.com website, and that Fotohaus

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“named the Franchisees as defendants in the lawsuit without a good faith basis to believe that any

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Franchisee had possession or control over the Photograph or played any role in displaying the

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Photograph on Proforma.com.” Id. ¶ 41. Despite lacking a good faith basis for believing the

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Franchisees played any role in the allegedly infringing conduct, Fotohaus “persists in the pursuit

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of its claims against the Franchisees.” Id. ¶ 42. As a result, Fotohaus has intentionally interfered

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with Proforma’s contractual relations with its Franchisees “[b]y bringing and maintaining a claim

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against the Franchisees for Copyright infringement despite knowing that the purported

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infringement occurred only at Proforma’s Proforma.com website rather than at websites owned or

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controlled by the Franchisees.” Id. ¶ 46.

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Plus/Patricia O’Neill; The MacKinnon Group, Inc.; Proforma One Marketing/Mike Goebel;
Proforma Express Graphics/David Anderson; Teamworkx LLC, d/b/a/ Teamworkx powered by
Proforma; Proforma Apollo Group/Warren Kramer; Proforma/Janet Ancheta; Proforma Color
Press / David Schmaeling. Compl. at 2.
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Fotohaus filed a motion to dismiss the counterclaim on October 29, 2018. ECF 28.

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II.

LEGAL STANDARD
“A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a

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claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’” Conservation

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Force v. Salazar, 646 F.3d 1240, 1241–42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d

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729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts

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as true all well-pled factual allegations and construes them in the light most favorable to the

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plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the

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Court need not “accept as true allegations that contradict matters properly subject to judicial
notice” or “allegations that are merely conclusory, unwarranted deductions of fact, or

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United States District Court
Northern District of California

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unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008)

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(internal quotation marks and citations omitted). While a complaint need not contain detailed

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factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to

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relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.

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Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the

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court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

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On a motion to dismiss, the Court’s review is limited to the face of the complaint and matters

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judicially noticeable. MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986); N. Star

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Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th Cir. 1983).

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In deciding whether to grant leave to amend, the Court must consider the factors set forth

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by the Supreme Court in Foman v. Davis, 371 U.S. 178 (1962), and discussed at length by the

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Ninth Circuit in Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2009). A district

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court ordinarily must grant leave to amend unless one or more of the Foman factors is present: (1)

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undue delay, (2) bad faith or dilatory motive, (3) repeated failure to cure deficiencies by

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amendment, (4) undue prejudice to the opposing party, or (5) futility of amendment. Eminence

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Capital, 316 F.3d at 1052. “[I]t is the consideration of prejudice to the opposing party that carries

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the greatest weight.” Id. However, a strong showing with respect to one of the other factors may

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warrant denial of leave to amend. Id.
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III.

DISCUSSION

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Fotohaus argues that the Court should dismiss Proforma’s counterclaim because it is

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barred by the California litigation privilege and the Noerr-Pennington Doctrine and because

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Proforma has failed to plausibly allege a claim for intentional interference with contractual

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relations (“IICR”). Because the Court agrees that the counterclaim is barred by California’s

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litigation privilege, it does not address the other grounds for the motion.

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California Civil Code § 47(b) states that “[a] privileged publication . . . is one made . . . in
any . . . judicial proceeding.” Under this law, “communications made in or related to judicial

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proceedings are absolutely immune from tort liability.” Ingrid & Isabel, LLC v. Baby Be Mine,

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LLC, 70 F. Supp. 3d 1105, 1140 (N.D. Cal. 2014). Courts apply the privilege to all torts except

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United States District Court
Northern District of California

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malicious prosecution, including IICR claims. Id.; cf. Visto Corp. v. Sproqit Tech., 360 F. Supp.

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2d 1064, 1070 (N.D. Cal. 2005) (intentional interference with prospective economic advantage).

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The privilege applies to “any communication (1) made in judicial or quasi-judicial proceedings;

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(2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation;

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and (4) that have some connection or logical relation to the action.” Baby Be Mine, 70 F. Supp. 3d

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at 1140 (quoting Silberg v. Anderson, 50 Cal. 3d 205, 212 (1990)). “Pleadings . . . in a case are

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generally viewed as privileged communications,” particularly where they are in the form of a

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claim that “furthers a litigant’s interest in a case.” Navellier v. Sletten, 106 Cal. App. 4th 763, 771

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(2003). The privilege even applies to prelitigation communications, so long as they are made “in

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good faith and actual contemplation of litigation.” Visto, 360 F. Supp. 2d at 1070; accord

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Eisenberg v. Alameda Newspapers, Inc., 74 Cal. App. 4th 1359, 1380 (1999).

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Fotohaus argues that the privilege bars Proforma’s counterclaim because the “act that

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forms the basis for Defendants’ counterclaim here is Fotohaus’s filing of a copyright infringement

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action against the Franchisees,” which is unquestionably protected. Mot. at 3–4. Proforma

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counters that “Fotohaus lacks any basis grounded in good faith for its allegation that its

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copyrighted photo was published on a website owned by any Franchisee Defendant,” despite

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Fotohaus having seven months to investigate the website’s ownership. Opp. at 2–4, ECF 32.

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Proforma argues that “at the time of the March 26, 2018 letter to Proforma” notifying it of the
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lawsuit, Fotohaus did not have a good faith basis to believe the Franchisees owned or controlled

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the allegedly infringing websites, as demonstrated in Exhibit A to the Complaint, which shows

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that all photos were posted on the Proforma.com website. Opp. at 7–8 (citing Compl., Ex. A, ECF

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1-1).

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The Court finds that Proforma’s counterclaim is barred by the litigation privilege. The

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only actions Proforma points to as intentionally interfering with its contractual relations are

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Fotohaus’s filing of the lawsuit and the cease and desist letter, which Fotohaus sent three days

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after filing the lawsuit. The privilege undoubtedly applies to these two communications. See

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Baby Be Mine, 70 F. Supp. 3d at 1140; Navellier, 106 Cal. App. 4th at 771.

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Proforma’s arguments to the contrary are unavailing. Try as it might to argue that its

United States District Court
Northern District of California

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counterclaim is not based on Fotohaus’s bringing suit against the Franchisees, it is clear from the

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Answer and Proforma’s opposition to the instant motion that this is exactly the basis on which it

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brings its counterclaim. See, e.g., Ans. ¶ 42 (alleging Fotohaus wrongfully “persists in the pursuit

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of its claims against the Franchisees”); Ans. ¶ 46 (arguing Fotohaus is liable for “bringing and

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maintaining a claim against the Franchisees for Copyright infringement despite knowing” the

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Franchisees played no role in the alleged actions); Opp. at 11 (“As predominantly small business

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owners, the Franchisees’ businesses are harmed by a lawsuit solely arising from the publication of

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a photo on Proforma’s website.); Opp. at 11 (“Moreover, the filing of a lawsuit against the

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Franchisees unfairly strains the business relationship and goodwill . . .”).

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And to the extent it claims that Fotohaus’s cease and desist letter is the basis for the

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counterclaim, this too is protected because it was in connection to judicial proceedings by litigants

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for the purpose of achieving the objects of the litigation. Baby Be Mine, 70 F. Supp. 3d at 1140.

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Proforma’s citations to cases involving prelitigation communications are inapposite because the

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cease and desist letter was sent after the litigation was filed, and thus was necessarily in good faith

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contemplation of litigation. Cf. Visto, 360 F. Supp. 2d at 1072–73. Otherwise, whether Fotohaus

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actually believed it could win on its claim against the Franchisees—that is, whether it brought the

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claim itself in good faith—plays no role in the Court’s analysis of whether the litigation privilege

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applies. See Adobe Sys. Inc. v. Coffee Cup Partners, Inc., No. 11-CV-2243-CW, 2012 WL
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3877783, at *12 (N.D. Cal. Sept. 6, 2012) (“[T]he presence or absence of malice or good or bad

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faith is irrelevant to the inquiry whether the litigation privilege is applicable.”) (quoting Mansell v.

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Otto, 108 Cal.App.4th 265, 279 n.47 (2003)); see also Visto, 360 F. Supp. 2d at 1072–73.
Because Proforma has not, and seemingly cannot, point to other “threatening” actions by

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Fotohaus that intentionally interfered with its contractual relations with its Franchisees that are not

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barred by the litigation privilege, any amendment here would be futile.

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IV.

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ORDER
For the foregoing reasons, as well as those stated on the record at the hearing on the

motion, Fotohaus’s motion to dismiss is GRANTED WITH PREJUDICE.

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United States District Court
Northern District of California

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IT IS SO ORDERED.

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Dated: April 4, 2019
______________________________________
BETH LABSON FREEMAN
United States District Judge

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