eMove, Inc. et al v. Hire a Helper LLC et al

Filing 78

ORDER Regarding Motion to Dismiss Counterclaims [Doc. No. 56 ]. Signed by Judge Cathy Ann Bencivengo on 12/20/2017. (jjg)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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EMOVE, INC., a Nevada corporation, and
U-HAUL INTERNATIONAL INC., a
Nevada corporation,

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Case No.: 17cv0535-CAB-JLB
ORDER REGARDING MOTION TO
DISMISS COUNTERCLAIMS [Doc.
No. 56]

Plaintiffs,
v.
HIRE A HELPER LLC, a California
limited liability company, and MICHAEL
GLANZ, an individual,
Defendants.

On October 23, 2017, Plaintiffs filed a motion to dismiss all of Defendants’
counterclaims and/or to strike count three of Defendants’ counterclaims. [Doc. No. 56.]
On November 13, 2017, Defendants filed an opposition. [Doc. No. 60.] On November 20,
2017, Plaintiffs filed a reply to the opposition. [Doc. No. 62.] For the reasons set forth
below, the motion to dismiss/strike is DENIED.
PROCEDURAL BACKGROUND
On March 16, 2017, Plaintiffs filed a complaint for declaratory relief and to stay
arbitration. [Doc. No. 1.] On May 2, 2017, Plaintiffs filed a First Amended Complaint
(“FAC”). [Doc. No. 12.] On May 16, 2017, Defendants filed a motion to dismiss Count
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I of the FAC. [Doc. No. 21.] On August 30, 2017, the Court granted the motion to

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dismiss Count I with leave to amend. [Doc. No. 51.] On September 19, 2017, Plaintiffs

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filed a Second Amended Complaint (“SAC”). [Doc. No. 52.]

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The SAC asserts four causes of action against Defendants: (1) for breach of a 2010

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settlement agreement (“Settlement Agreement”) between the parties; (2) for breach of the

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covenant of good faith and fair dealing during the performance of that Settlement

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Agreement; (3) for a declaratory judgment regarding the use of Plaintiffs’ registered

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trademarks by Defendants and certain affiliates; and (4) for unfair competition. [Doc. No.

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52 ¶¶ 57–83.]

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Defendants answered the SAC and filed counterclaims (“Counterclaims”) seeking

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(1) declarations regarding Defendants’ duty under the Settlement Agreement to protect

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Plaintiffs’ trade secrets and other confidential information; (2) declarations regarding the

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impact of the Settlement Agreement on parties who are or may become interested in

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HAH; and (3) a declaration that the final sentence of Paragraph 4 of the Settlement

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Agreement (the “Nonopposition Clause”) is void. [Doc. No. 53 ¶¶ 14–36.]

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ALLEGATIONS OF COUNTERCLAIMS

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The parties settled a prior dispute by entering into a Settlement Agreement in

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September 2010. [Doc.No. 53 at ¶¶ 11.] The Settlement Agreement contains the

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following provision:

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4. Respondents’ Acknowledgement of Claimants’ Intellectual Property
Including the Payment Code. Respondents hereby acknowledge Claimants’
proprietary and ownership interest in the Trademarks, copyrights in
Claimant’s movinghelp.com website, trade secrets, Payment Code and
Claimants other Intellectual Property. Claimants hereby grant Hire a Helper
a perpetual, fully paid up, noncancellable, worldwide, nonexclusive,
nontransferable, nonsublicenseable license to use Claimants’ trade secrets
that existed when Glanz was a service provider for eMove and to which
Glanz had access. Said license is solely for the use of said trade secrets as
such is currently being used on the hireahelper.com website. Said license
does not include a license to use the Trademarks or the Payment Code. Said
license shall become effective as of the Effective Date. Respondents shall
discontinue all use of the Payment Code and Trademarks prior to the
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Effective Date. Said license shall terminate upon the breach of this
Settlement Agreement by Respondents or upon an attempted assignment,
sub license or other transfer of this license by one or both Respondents.
Respondents shall take reasonable steps to maintain the secrecy of
Claimants’ trade secrets. Other than the license granted in this Settlement
Agreement, Respondents have no rights, title or interest in Claimants’
Intellectual Property, including the Payment Code and Trademarks.
Respondents agree not to oppose, challenge, or petition against the use or
registration of, in any country, in any trademark office, court, administrative
or other government body Claimants’ Intellectual Property (including the
Payment Code) or Trademarks (including petition to cancel any application,
registration, or re-registration of the Trademarks).
[Doc. No. 53-1 at ¶4.]

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In the final sentence of Paragraph 4 of the Settlement Agreement, the

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Nonopposition Clause, Defendants “agree not to oppose, challenge, or petition

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against the use or registration of, in any country, in any trademark office, court,

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administrative or other government body [Plaintiffs’] Intellectual Property

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(including the Payment Code) or Trademarks (including petitioning to cancel any

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application, registration, or re-registration of the Trademarks.” [Doc. No. 53-1 at ¶

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4.]

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According to Defendants’ Counterclaims, “controversies have arisen and

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now exist concerning their respective rights and obligations under the Settlement

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Agreement.” [Doc. No. 53 at ¶ 12.] Defendants also allege that Plaintiffs “may

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dispute” some of Defendants’ contentions. [Id. at ¶ ¶ 21, 27.]

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Defendants’ Counterclaims contain three counts. In Count One, Defendants

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request declarations that “1) [Defendants] do not possess any of [Plaintiffs’] trade

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secrets; 2) there are no trade secrets belonging to [Plaintiffs] covered by the

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Settlement Agreement; 3) [Defendants] are not obligated to maintain as

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confidential any matters as [Plaintiffs’] alleged trade secrets pursuant to the

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Settlement Agreement or otherwise; and 4) HireAHelper’s current website does

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not use or contain any of [Plaintiffs’] trade secrets.” [Doc. No. 53 at ¶ 22.] Count

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Two asks this Court to declare that “owners of all or part of HireAHelper’s
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equitable interests . . . other than Glanz, are not parties to the Settlement

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Agreement and are not bound by it,” and that “any party that purchases all or part

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of HireAHelper’s assets . . . are not parties to the Settlement Agreement and are

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not bound by it.” [Id. at ¶¶ 24–25, 28.] Count Three seeks a declaration that the

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Nonopposition Clause is void and unenforceable. [Id. at ¶ 36.]

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DISCUSSION

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A. Legal Standard.

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Under Rule 12(b)(6), a party may file a motion to dismiss based on the failure to

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state a claim upon which relief may be granted. A Rule 12(b)(6) motion challenges the

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sufficiency of a complaint as failing to allege “enough facts to state a claim to relief that is

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plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A facial

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plausibility standard is not a “probability requirement” but mandates “more than a sheer

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possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678

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(2009) (internal quotations and citations omitted). For purposes of ruling on a Rule

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12(b)(6) motion, the court “accept[s] factual allegations in the complaint as true and

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construe[s] the pleadings in the light most favorable to the non-moving party.” Manzarek

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v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). “[D]ismissal may

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be based on either a lack of a cognizable legal theory or the absence of sufficient facts

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alleged under a cognizable legal theory.” Johnson v. Riverside Healthcare Sys., 534 F.3d

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1116, 1121 (9th Cir. 2008) (internal quotations and citations omitted); see also Neitzke v.

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Williams, 490 U.S. 319, 326 (1989) (“Rule 12(b)(6) authorizes a court to dismiss a claim

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on the basis of a dispositive issue of law.”).

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Even under the liberal pleading standard of Rule 8(a)(2), under which a party is only

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required to make “a short and plain statement of the claim showing that the pleader is

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entitled to relief,” a “pleading that offers ‘labels and conclusions' or ‘a formulaic recitation

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of the elements of a cause of action will not do.’” Iqbal, 556 U.S. at 678 (quoting Twombly,

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550 U.S. at 555). “[C]onclusory allegations of law and unwarranted inferences are

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insufficient to defeat a motion to dismiss.” Adams v. Johnson, 355 F.3d 1179, 1183 (9th
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Cir. 2004); see also Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.2011) (“[A]llegations in a

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complaint or counterclaim may not simply recite the elements of a cause of action, but

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must contain sufficient allegations of underlying facts to give fair notice and to enable the

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opposing party to defend itself effectively”). The court must be able to “draw the

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reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556

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U.S. at 663. “Determining whether a complaint states a plausible claim for relief . . . [ is]

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a context-specific task that requires the reviewing court to draw on its judicial experience

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and common sense.” Id. at 679.

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2. Count I.

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Plaintiffs argue Count I should be dismissed because it does not present a justiciable

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controversy and the requested declarations would serve no useful purpose. [Doc. No. 56-

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1 at 9-13.] Defendants argue Count I is justiciable because there is a dispute regarding

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Plaintiffs’ alleged trade secrets; and a declaratory judgment regarding trade secrets serves

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a useful purpose. [Doc. No. 60 at 10-12.]

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Under 28 U.S.C. §2201(a), a federal court may issue a declaratory judgment in a

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“case of actual controversy.” The statutory phrase “case or controversy” refers to the types

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of “cases” or controversies” that are justiciable under Article III of the U.S. Constitution.

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Aetna Life Ins. V. Haworth, 300 U.S. 227, 239-240 (1937); Medimmune, INc. v. Genentech,

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549 U.S. 118, 125-26 (2007). The burden is on the party claiming declaratory judgment

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jurisdiction to establish that an Article III case or controversy existed at the time the claim

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for declaratory relief was filed. Arris Group, Inc. v. British Telecommunications PLC, 639

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F.3d 1368, 1373-74 (Fed. Cir. 2011).

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A declaratory relief case must be “ripe” for judicial determination. A substantial

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controversy must exist between parties having adverse legal interests, “of sufficient

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immediacy and reality to warrant the issuance of a declaratory judgment.” City of Colton

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v. American Promotional Events, Inc.-West, 614 F.3d 998, 1004-05 (9th Cir. 2010)(internal

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quotes omitted); Golden v. California Emergency Physicians Med. Group, 782 F.3d 1083,

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1087 (ripeness concerns may be implicated in contract dispute where breach or injury yet

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to occur).

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Adjudicating rights and obligations in the absence of a live “case or controversy”

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would violate the Article III limitation against advisory opinions. O’Connell & Stevenson,

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Rutter Group Prac. Guide: Federal Civ. Pro. Before Trial (The Rutter Group 2017),

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§10:24.2. See Calderon v. Ashmus, 523 U.S. 740, 747 (1998)(no “case or controversy”

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where plaintiff sought advance ruling on validity of a defense that defendant might raise in

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future proceedings; Klinger v. Conan Doyle Estate, Ltd., 755 F.3d 496, 498-99 (7th Cir.

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2014)(no asking “federal judges for legal advice”).

Finally, declaratory relief may be

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sought to resolve disputes regarding such matters as . . . the [m]eaning of terms of contract

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in dispute.” O’Connell & Stevenson, Rutter Group Prac. Guide: Federal Civ. Pro. Before

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Trial (The Rutter Group 2017), §10:12 (citations omitted).

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Here, a global review of the complaint and counter-complaint shows that the parties

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are in disagreement as to what is meant by certain terms in the Settlement Agreement, and

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that disagreement has caused a substantial impasse. While some of Counter-claimaints’

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requested declarations border on requests for legal advice, others are appropriate requests

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for a determination as to what the parties intended when they entered into the Settlement

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Agreement. Thus, for example, while this Court is not inclined to adjudicate what is or is

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not a “trade secret” or a “trademark” in the general sense (that was the subject of the

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previous litigation), it can determine what the parties intended a particular term to mean,

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and/or whether there was a meeting of the minds. Therefore, the motion to dismiss Count

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I is DENIED.

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3. Count II.

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Plaintiff argues Count II should be dismissed because there is no controversy

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regarding the rights and obligations of third parties under the Settlement Agreement, and

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Defendants’ requested declaration regarding the rights of parties who may become

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interested in HAH is purely hypothetical. [Doc. No. 56-1 at 13-15.] Defendants argue

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there is an actual controversy as to whether Fidelity, as a member of HireAHelper, is bound
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by the Settlement Agreement. [Doc. No. 60 at 13.] To the extent Count II seeks a

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declaration as to whether a particular entity is bound by the Settlement Agreement, there

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is a sufficient controversy for declaratory relief. Therefore, the motion to dismiss Count II

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is DENIED.

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4. Count III.

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Plaintiff argues Count III should be dismissed because it is the mirror image of

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Plaintiff’s breach of contract claim and is more properly brought as an affirmative defense.

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[Doc. No. 56-1 at 15-17.] Defendants argue Count III is not identical to the breach of

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contract claim because the argument that the nonopposition clause is void and

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unenforceable is one of four affirmative defenses to the breach of contract claim. [Doc.

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No. 60 at 14-15.] In addition, Defendants argue Count III is not redundant of the breach

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of contract claim because Count III seeks different relief. [Doc. No. 60 at 15.]

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Here, although the breach of contract claim and Count III obviously overlap, it is not

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clear that Count III is in fact entirely redundant of the breach of contract claim. Given that

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“it is very difficult to determine whether the declaratory-judgment counterclaim really is

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redundant prior to trial . . . [t]he safer course for the court to follow is to deny a request to

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dismiss a counterclaim for declaratory relief unless there is no doubt that it will be rendered

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moot by the adjudication of the main action.” 6 Charles A. Wright & Arthur R. Miller,

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Federal Practice & Procedure § 1406, at 36 (2d ed.1990). Therefore, the motion to dismiss

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and/or strike Count III is DENIED.

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CONCLUSION
For the reasons set forth above, the motion to dismiss all of Defendants’

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counterclaims and/or to strike Count III is DENIED.

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Dated: December 20, 2017

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