Certified Nutraceuticals Inc. v. The Clorox Company et al
Filing
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ORDER Denying Defendant Sarah Quadri and Fatma Boukarhi's Motion for Attorney Fees (Doc. 56 ). Signed by Judge Thomas J. Whelan on 2/19/2020. (jdt)
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UNITED STATES DISTRICT COURT
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SOUTHERN DISTRICT OF CALIFORNIA
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CERTIFIED NUTRACEUTICALS,
INC. a California corporation,
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ORDER:
Plaintiff,
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Case No.: 18-cv-00744 W (KSC)
v.
DENYING DEFENDANT SARAH
QUADRI AND FATMA
BOUKHARI’S MOTION FOR
ATTORNEY’S FEES [DOC. 56]
THE CLOROX COMPANY, a
Delaware Corporation; NEOCELL
CORPORATION, a California
Corporation; NEOCELL HOLDING
COMPANY, a Delaware Limited
Liability Company; NUTRANEXT, a
Delaware Corporation; AVICENNA
NUTRACEUTICAL,
LLC, a Georgia Limited Liability
Company; and DOES 1 through 10,
inclusive,
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Defendants.
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Pending before the Court is Defendant Sarah Quadri and Fatma Boukarhi’s
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(collectively, “Individual Defendants”) motion for attorney’s fees. [Doc. 56.] The Court
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decides the matter without oral argument pursuant to Civil Local Rule 7.1(d)(1). For the
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reasons that follow, the Court DENIES Defendants’ motion for attorney’s fees.
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//
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18-cv-00744 W (KSC)
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I.
BACKGROUND
This case was initially filed by the Plaintiff, Certified Nutraceuticals, against
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Defendants, The Clorox Company, Neocell Corporation, Neocell Holding Company,
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Nutranext, Sarah Quadri, Fatma Boukhari, Avicenna Nutraceutical LLC, and Does 1
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through 10. The original complaint alleged false advertising in violation of the Lanham
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Act, false designation of origin in violation of the Lanham Act, unfair competition, and
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false advertising.
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The Plaintiff filed a Second Amended Complaint (“SAC”) which alleged that
Defendants, The Clorox Company, Neocell Holding Company, and Nutranext, are
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retailers that sell dietary supplements using raw materials provided by the Plaintiff’s
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competitor, Defendant Avicenna Nutraceutical, LLC (“Avicenna”). The SAC alleged
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that Defendants “have been falsely passing off inferior products as Chicken Sternum
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Collagen Type II[,]” which is contained in the Plaintiff’s product. (SAC [Doc 21] ¶¶ 16,
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20, 23.) Additionally, the SAC alleged Avicenna sold its raw materials at a lower market
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rate giving them an unfair competitive advantage and that Avicenna knew or should have
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known their practices were deceptive. (SAC ¶ 23.) The SAC alleged the Individual
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Defendants are the principals of Defendants Neocell Holding Company, Nutranext, and
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The Clorox Company. (SAC ¶¶ 20, 21.)
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On May 6, 2019, the Individual Defendants filed a motion to dismiss for failure to
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state a claim. [Doc. 42.] The Court found that the SAC did not claim misrepresentation
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by the Individual Defendants; nor did the SAC allege with particularity any facts that
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could give rise to individual liability on behalf of the Individual Defendants. (Order
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Granting Defs.’ Mot. Dismiss [Doc. 49] 5:2-4.) The Plaintiff was warned of these
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deficiencies when the Individual Defendants served the Plaintiff with a draft Rule 11
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motion that demanded dismissal from the case. (Defs.’ Mot. Attorney Fees [Doc. 56]
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6:22-26.) The Plaintiff nevertheless continued with its claims, filing an opposition to the
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motion to dismiss. (Id. at 7:1.) The Court granted the Individual Defendants’ motion to
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dismiss with leave to amend on June 10, 2019. (Order Granting Defs.’ Mot. Dismiss.)
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The Plaintiff filed a Third Amended Complaint in compliance with the June 10, 2019
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order and did not name the Individual Defendants. (TAC [Doc 50].) Approximately
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three months later, the Individual Defendants filed this motion for attorney’s fees in the
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amount of $73,805.20 pursuant to the Lanham Act (15 U.S.C. § 117(a)).
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II.
LEGAL STANDARD
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Section 35(a) of the Lanham Act provides that “[t]he court in exceptional cases
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may award reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117(a). “A
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‘prevailing party’ is one who has been awarded some relief by the court.” Buckhannon
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Bd. & Care Home, Inc. v. W. Va. Dept. of Health & Human Res., 532 U.S. 598, 603
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(2001). Prevailing party status rests on a judicial sanction that materially alters the
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parties’ legal relationship. Klamath Siskiyou Wildlands Ctr v. U.S. Bureau of Land
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Mgmt., 589 F.3d 1027, 1031 (9th Cir. 2009). Judgments on the merits and court-ordered
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decrees create a material alteration of the parties legal relationship and permit an award.
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Buckhannon, 532 U.S. at 598. Yet, a defendant’s voluntary change in conduct, although
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accomplishing what the plaintiff sought to achieve, “lacks the necessary judicial
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imprimatur on the change.” Id. at 598–98.
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Not only does the party requesting fees need to be the prevailing party, but the
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court must also determine the case is an exceptional one to grant the award. See §
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1117(a). To determine if a case is exceptional, the Supreme Court has held that a district
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court should look to the totality of the circumstances to determine if the infringement was
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exceptional. Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554
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(2014). “[A]n ‘exceptional’ case stands out from others with respect to the substantive
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strength of a party’s litigating position . . . or the unreasonable way in which the case was
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litigated.” Id. Specifically, the court looks to a “‘nonexclusive’ list of ‘factors’ including
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‘frivolousness, motivation, objective unreasonableness (both in the factual and legal
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components of the case) and the need in particular circumstances to advance
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considerations of compensation and deterrence.’” SunEarth, Inc. v. Sun Earth Solar
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Power Co.,839 F.3d 1179, 1181 (9th Cir. 2016) (citing Octane Fitness, 572 U.S. at 558
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n.6).
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III.
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DISCUSSION
The issue here is whether the Individual Defendants are the prevailing party as a
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result of the order granting the motion to dismiss. The Plaintiff argues the Individual
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Defendants are not the prevailing party because the order granted the dismissal with leave
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to amend. (See Pl.s’ Opp’n [Doc. 58].) The Individual Defendants counter, arguing they
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are the prevailing party because the Plaintiff is precluded from refiling its claim against
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them. (See Defs.’ Reply [Doc. 60] 4:1-2.)
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A dismissal without prejudice does not materially alter the legal relationship of the
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parties. U.S. v. Milner, 583 F.3d 1174, 1196–97 (9th Cir. 2009). This is because the
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defendant remains subject to the risk of refiling. Id. However, a defendant is the
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prevailing party if the plaintiff is precluded from refiling the claim against the defendant.
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Cadkin v. Loose, 569 F.3d 1142, 1149 (9th Cir. 2009).
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Here, the Court granted the Individual Defendants’ motion to dismiss with leave to
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amend. This gave the Plaintiff the opportunity to refile its claim against the Individual
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Defendants. Even though the Plaintiff did not include the Individual Defendants in its
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Third Amended Complaint, the fact that the Plaintiff chose not to does not mean they
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cannot add the Individual Defendants at a later date. See Buckhannon, 532 U.S. at 605
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(explaining voluntary conduct lacks judicial imprimatur and does not constitute a judicial
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sanction.) Although the order granting the motion to dismiss conditioned the amended
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pleading to be filed on or before June 24, 2019, the Plaintiff still has an opportunity to
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ask the Court’s permission to refile against the Individual Defendants in a Fourth
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Amended Complaint. Because the Plaintiff can ask the Court’s permission to file a
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Fourth Amended Complaint, the Plaintiff is not yet precluded from refiling the claim
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against the Individual Defendants. Thus, the Individual Defendants are not the prevailing
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party.
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Because we have concluded the Individual Defendants are not the prevailing party,
we need not discuss whether this case is an exceptional one pursuant to the Lanham Act.
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IV.
CONCLUSION & ORDER
For the foregoing reasons, the Court DENIES the Individual Defendants’ motion
for attorney’s fees [Doc. 56].
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IT IS SO ORDERED.
Dated: February 19, 2020
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