Realty v. Brunet
Filed 8/6/13 All Cities
Realty v. Brunet CA2/8
NOT TO BE PUBLISHED
IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
ALL CITIES
REALTY, INC.,
Plaintiff and Appellant,
v.
JIM BRUNET
et al.,
Defendants and Respondents.
B241999
(Los Angeles
County
Super. Ct.
No. BC355724)
APPEAL
from a judgment of the Superior Court
of
County. Anthony J.
Mohr, Judge. Affirmed in part; reversed
in part and remanded.
Parker
Shumaker Mills, William K. Mills, Clarisse Young Shumaker and Theodore W. Frank
for Plaintiff and Appellant.
Raines
Feldman and Konrad Gatien for Defendants and Respondents Jim Brunet, Melissa
Barlow, Sam Wogomon, Karen Montandon, Connie Donohue, David Marzouk, Woody
Stahl, Albert Aftalion, Willie Overton, Shalon Guli, Nancy Ramsey, Louisa
Millington, and Cynthia Satterfield.
_____________________
Plaintiff All Cities Realty, Inc.’s founder registered the domain name
“allcitiesrealty.com†in 1996 and became one of the first websites real estate
consumers visited when searching the worldwide web for real estate. He also started using the mark “All Cities
Realty†in connection with his services as a real estate broker. In 2001, the United States Patent and
Trademark Office approved his application to register the mark, and California
registered the mark in 2006. Plaintiff
has continually used and protected the mark.
In October
2002, nonparty CF Real Estate Loans, Inc. (Re/Max) registered the dba “Re/Max
All Cities Realty†with the California Department of Real Estate, and launched
an extensive advertising campaign in print media and on the internet using the
names “All Cities Realty†and “[Re/Max] All Cities Realty.†Re/Max’s own website (which plaintiff
describes as the “master websiteâ€) used “[Re/Max] All Cities Realty†as the
umbrella name for all of its related companies and franchises and in 14 real
estate offices in Southern California. Each of Re/Max’s 1,700 independent contractor
brokers and agents posted their own biographical pages and real estate listing
pages on the master website under the All Cities Realty mark, and used the All
Cities Realty mark in their own advertising in periodicals and newspapers, on
bus benches and lawn signs.
Plaintiff
sued Re/Max in federal court, and later filed this action against the 1,700 brokers
and sales agents of Re/Max (defendants), for their unauthorized use of the “All
Cities Realty†mark. On the eve of trial
in the federal action, Re/Max filed bankruptcy, and this case was stayed. Plaintiff recovered nothing from Re/Max, and the
stay was lifted in this action.
Some
defendants demurred and sought judgment on the pleadings, reasoning plaintiff
could not hold Re/Max’s entire sales force responsible for Re/Max’s
infringement, based on two federal cases, Chanel,
Inc. v. Italian Activewear of Florida, Inc. (11th Cir. 1991) 931 F.2d
1472 (Chanel) and
11, 2005, No. 03-CIV-5808 (WJM)) 2005 U.S.Dist. LEXIS 17043 (
without leave to amend and granted judgment on the pleadings, after permitting
plaintiff to make an offer of proof.
Plaintiff
says this case presents a question of first impression concerning what standard
should apply to decide the individual liability of the independent contractor
sales force of an infringing corporation.
Defendants agree this is a case of first impression but contend a
plaintiff cannot hold 1,700 individuals in the sales force liable without
pleading each individual actively participated in the infringing company’s
decision to engage in infringing acts.
We
find defendants’ motions were based on the erroneous assumption that plaintiff
has sued defendants only for Re/Max’s infringement, and not for defendants’ own
infringing acts. Because the operative
complaint alleges direct infringement by defendants, we reverse in part, and
remand for further proceedings. However,
we find plaintiff failed to state a cause of action for vicarious infringement,
and we affirm dismissal of that cause of action.
In June 2005,
plaintiff sued Re/Max in federal court for trademark infringement, based on
Re/Max’s use of its “All Cities Realty†mark.
In July 2006, plaintiff filed this lawsuit against the 1,700
affiliated with Re/Max, for their use of the All Cities Realty mark. This case was stayed pending resolution of
plaintiff’s federal action against Re/Max.
Ultimately, Re/Max declared bankruptcy, and plaintiff recovered
nothing. The stay of this action was
then lifted.
In a demurrer
to the original complaint, defendants accused plaintiff of “shak[ing] down the
individual defendants . . . for money it failed to recover from Re/Max.†Defendants contended they are not “personally
liable for trademark infringement as a matter of law, unless the Plaintiff
alleges and proves that each individual defendant personally acted as a moving
force in [Re/Max’s] decision to infringe.â€
Defendants relied on two federal cases, Chanel, supra,
and Omega, supra, for the proposition that individual defendants may be
liable for a third party’s infringement only if they “‘knowingly
party and were the “‘moving, active, conscious force’†behind the third party’s
decision to infringe. Plaintiff opposed
the demurrer, contending the complaint stated claims for direct infringement by defendants, and the two federal cases were
inapposite. The demurrer was sustained
with leave to amend.
The
first amended complaint included new allegations that “[Re/Max] could not have
infringed on Plaintiff’s trademark without the substantial efforts of
Defendants who marketed, advertised and sold real estate using Plaintiff’s
trademark.†Defendants again demurred on
the basis of Chanel and
and cannot allege, that any of the Demurring Defendants exercised the control
over Re/Max’s alleged infringement that would be necessary for individual
liability to attach.†Defendants also
demurred on the ground of misjoinder, contending the claims against the various
brokers and agents did not arise out of the same transaction or
occurrence.
The
trial court again sustained the demurrer with leave to amend, ruling it would
not relax the pleading requirements simply because plaintiff had elected to sue
1,700 defendants. The court also entered
a case management order under Cottle v.
Superior Court (1992) 3 Cal.App.4th 1367, requiring plaintiff to make
“offers of proof for every defendant. . . .
[¶] . . . we need to know what
[each defendant] did to become the driving force†behind Re/Max’s
infringement.
With
its second amended complaint, plaintiff included an offer of proof of nearly
1,500 pages, consisting mostly of advertisements by the defendant brokers and
agents that appeared in print and on the internet. The second amended complaint alleged causes
of action for California trademark infringement; injury to plaintiff’s business
reputation and/or dilution of plaintiff’s mark; infringement of mark to enhance
commercial value of defendants’ services; California common law unfair
competition; vicarious trademark infringement; injunctive relief; and
California statutory unfair competition.
The second
amended complaint alleged the history of plaintiff’s registration of the All Cities Realty trademark and the
infringing acts of Re/Max and its brokers and agents summarized above. Plaintiff further alleged it demanded Re/Max
to cease and desist use of the All Cities mark, but Re/Max and defendants
continued to use plaintiff’s mark.
Re/Max launched a “[Re/Max] All Cities Realty†master website in
2005. Defendant brokers and agents added
their own real estate listings to this website, as well as personal
biographical and contact information.
Defendant brokers and agents “used the All Cities Realty mark on the
website, print media, signs, business cards, and contractual documents.†Re/Max created separate websites for each of
the defendants, and defendants “had substantial control over the infringing . .
. websites, which they used to promote their personal business activities, and
which utilized and displayed the All Cities Realty mark.â€
The
second amended complaint recited that in the federal action, Re/Max maintained
it was not liable for the infringing conduct of its brokers and agents as they
“were independent contractors and as such had control over their own marketing
and advertising.†Re/Max’s brokers and
agents were compensated on a “100% commission basis.†Discovery obtained in the
independent contractor agreements with Re/Max.
Under the agreements, defendants were not “‘employee[s] for any
purpose[] whatsoever.’†Defendants “had sole
control over their own businesses and business decisions.â€
The second amended
complaint also recited pertinent history of this case, including that Re/Max
moved ex parte to intervene, alleging “it had defense and indemnification
obligations to each and every [d]efendant.â€
Defendants
Connie Donohue, Karen Montandon, and Ken Wogomon demurred to the second amended
complaint. A second group of defendants,
identified as the “KMW†defendants (consisting of 131 individual defendants),
moved for judgment on the pleadings.
Connie Donohue, Karen Montandon, and Ken Wogomon filed a notice of
joinder in the KMW defendants’ motion.
The demurrer contended under Chanel
and Omega, the legal standard for
assessing defendants’ liability was whether defendants were the moving, active,
conscious force behind Re/Max’s decision to infringe, and no such facts were
alleged. The motion for judgment on the
pleadings also contended Chanel and
alleged. This time, defendants
did not assert misjoinder as a basis for relief in their motions.
The
trial court, relying on Chanel and
imposed upon “individuals who participated in, but were not the moving force
behind . . . the infringing conduct of a third party.†The court sustained the demurrer without
leave to amend and granted the motion for judgment on the pleadings. A judgment of dismissal was entered, and this
timely appeal followed.
A demurrer
tests the legal sufficiency of the complaint.
We review the complaint de novo to determine whether it alleges facts
sufficient to state a cause of action.
For purposes of review, we accept as true all material facts alleged in
the complaint, but not contentions, deductions or conclusions of fact or law. We also consider matters that may be
judicially noticed. (
318.) “‘A demurrer tests the pleadings
alone and not the evidence or other extrinsic
matters. . . . The only
issue involved in a demurrer hearing is whether the complaint, as it stands,
unconnected with extraneous matters, states a cause of action.’†(Hahn
v. Mirda (2007) 147 Cal.App.4th 740, 747, citations omitted.) When a demurrer is sustained without leave to
amend, “we decide whether there is a reasonable possibility that the defect can
be cured by amendment: if it can be, the
trial court has abused its discretion and we reverse; if not, there has been no
abuse of discretion and we affirm.†(
involves the same standards and procedures as a general demurrer. (Richardson-Tunnell
v. School Ins. Program for Employees (2007) 157 Cal.App.4th 1056, 1061;
Cal.App.4th 1057, 1064.)
1.
Trademark
Claims
Defendants contend only
plaintiff’s common law trademark rights are at stake, because the original
complaint was filed before plaintiff registered its mark in California, and the
conduct complained of generally predates registration of the mark. Plaintiff agrees the second amended complaint
states claims for common law infringement, but contends that because it filed
articles of incorporation under the All Cities Realty name in California in
1999, its statutory rights are also at
issue.
title="">[1] Plaintiff contends it also has federal
statutory rights because the fifth cause of action invokes the Lanham Trademark
Act (15 U.S.C. § 1051 et seq.).
We find it is immaterial
here whether plaintiff’s state law claims are characterized as common law or
statutory claims. Under California’s
trademark statutes, registration of the mark creates a presumption of
ownership. (See, e.g.,
Carolina Dairy Foundation, Inc. v. Foremost-McKesson, Inc. (1979) 92 Cal.App.3d 98, 106 & fn. 5;
see also Bus. & Prof. Code, § 14245 [elements of a statutory
infringement claim], § 14259 [California’s Model State Trademark Law shall not
“adversely affect the rights or the enforcement of rights in marks acquired in
good faith at any time within common lawâ€].)
Since it is undisputed the second amended complaint adequately alleges
plaintiff’s ownership of the “All Cities Realty†mark, the statutory basis for
the claim of infringement adds nothing.
The elements of an
infringement claim under California statutory and common law are plaintiff’s earlier and continuous use of
a trademark, defendant’s subsequent use of a confusingly similar trademark, and
likelihood of confusion in the minds of the public that defendant’s
business is the same as, or affiliated with, plaintiff’s business. To prove liability for trademark infringement,
plaintiff need only prove defendants used the mark plaintiff used first and
continuously.
(See Sunset House Distributing Corp. v. Coffee Dan’s, Inc. (1966) 240 Cal.App.2d 748, 753; see also
Bus. & Prof. Code, § 14245.)
In their
demurrer and motion for judgment on the pleadings, defendants contended the
second amended complaint does not allege defendants directly infringed
plaintiff’s trademark, but only alleges defendants’ indirect, or secondary,
infringement by participating in Re/Max’s infringing marketing scheme. The distinction between direct and
indirect infringement is important because the elements of the claims are
different. Defendants argue they
may only be liable for participating in Re/Max’s infringement if they were a “moving, active, conscious
force†behind Re/Max’s decision to infringe.
(See Chanel,
Defendants
urge us to rely on federal cases construing federal trademark claims. The Ninth Circuit has found, “As a
general matter, trademark claims under California law are ‘substantially
congruent’ with federal claims and thus lend themselves to the same analysis.†(Grupo
Gigante S.A. de C.V. v. Dallo & Co. (9th Cir. 2004) 391 F.3d 1088,
1100.) Defendants argue, in the absence
of California authority discussing independent contractor liability for
trademark infringement by a principal, we should follow the federal cases
applying tort concepts of liability under federal trademark law. (See Chanel,
supra, 931 F.2d at pp. 1477-1478;
1421, 1429-1434 [applying the law of agency, including the doctrine of apparent
authority, to determine scope of liability under the Lanham Act];
Services, Inc. (7th Cir. 1992) 955 F.2d 1143, 1148-1150 [discussing
vicarious and contributory liability for infringement].)
The Chanel
and Omega holdings on which
defendants rely are premised on joint tortfeasor liability. In Chanel, the
question was whether a defendant could be liable for infringement when he was
merely a friend of the owner of an infringing store which sold knock-off Chanel
merchandise, was not an employee of the infringer, and would only occasionally
“‘keep an eye on things’†while the owner was away. (Chanel, supra, 931 F.2d at p.
1474.) The court acknowledged that “[n]atural
persons, as well as corporations, may be liable for trademark infringement under
the Lanham Act. [Citations.] Because of its very nature a corporation can
act only through individuals. ‘Obviously
. . . if there was an infringement by the corporation, this infringement was
caused by some one or more persons either officers or employees of the
corporation who caused the acts to be done.’
[Citation.] If an individual
actively and knowingly caused the infringement, he is personally liable.†(Id.
at p. 1477.) Nevertheless, the court reversed the grant of summary
judgment for Chanel because “[t]he link between [defendant] and the
infringing activities is . . . tenuous.â€
(Id. at p. 1478.)
In Omega, the question was
whether a check cashing business proprietor, who provided check cashing
services for an infringer and received a 10 percent commission on checks cashed
for the infringer, could be liable for the infringer’s trademark
infringement. (Omega, supra, 2005
U.S.Dist. Lexis 17043.) The
the defendant liable for infringement, defendant “‘must personally take part in
infringing activities or specifically direct [others] to do so,’
[citation]. In other words,
participation in activities merely
related to the infringing acts is not enough.†(Ibid.) Accordingly, the Omega court concluded summary judgment in favor of the plaintiff
was not warranted. (Ibid.)
Omega relied primarily on
substantially participates in the corporation’s act of trademark infringement
is personally liable . . . even though he acted as an agent of the corporation
rather than on his own behalf [because a] person who knowingly and
significantly participates in another’s act of trademark infringement is
himself guilty of infringement.â€
(Citation omitted.)
Chanel and Omega both relied exclusively on cases addressing the liability of
corporate officers and directors for their participation in their corporation’s
infringement. (See Chanel, supra,
931 F.2d at pp. 1477-1478, citing Mead Johnson & Co. v. Baby’s
Formula Serv., Inc. (5th Cir.
1968) 402 F.2d 19 & Wilden Pump & Engineering Co. v. Pressed
& Welded Products Co.
(9th Cir. 1981) 655 F.2d 984, 990; see Omega,
supra, 2005 U.S.Dist. Lexis
17043, citing
supra, 977 F.2d at p. 807.)
However, we are not
persuaded these authorities have any bearing on whether an independent
contractor sales force may be liable for their own acts of infringement. Defendants
have construed the second amended complaint as only stating claims under
secondary or joint tortfeasor theories of infringement, rather than for direct
infringement by defendants. Accordingly,
defendants would have us construe the second amended complaint too narrowly.
The second amended complaint alleged defendants
had complete discretion over their marketing, and directly infringed on
plaintiff’s mark through their own marketing efforts. It alleged defendants had exclusive control over their own
marketing activities and made independent use of Re/Max’s marketing strategy to
generate 100 percent of their commissions, so their infringing acts were
not performed for the benefit of Re/Max. The major misapprehension of the demurrer and
motion for judgment on the pleadings is that they ignored the allegations of
defendants’ acts of direct infringement, undertaken independently of
Re/Max.
We
recognize there are also allegations in the second amended complaint, which
have been incorporated in all of the causes of action, that defendants engaged
in secondary infringement, or were joint tortfeasors with Re/Max, in addition
to their own acts of direct infringement.
We do not decide here whether those claims are viable. It is well settled demurrers do not
lie as to parts of claims, as long as some valid claim is alleged. (See Fremont
Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97,
119.) Discovery and other proceedings
will disclose whether plaintiff’s claims are only based on theories that
defendants contributed to Re/Max’s infringement. However, at the pleading stage, resolution of
this issue is
premature. Because the second amended
complaint alleged acts of direct infringement by defendants, independent of
Re/Max, the judgment of dismissal must be reversed as to the first, second,
third, fourth, sixth, and seventh causes of action, all of which state
claims for direct infringement, under different (albeit related) theories.
The fifth cause
of action for vicarious infringement under the Lanham Act must be addressed
separately. This claim alleged “[d]efendants benefitted . .
. from the infringement of the All Cities Realty mark by the [Re/Max] All
Cities Realty Entities [because defendants] paid consideration . . . to
[Re/Max] in order to use and contribute to the infringing advertising and
promotional materials created by [Re/Max].â€
Under the theory of vicarious infringement, a defendant need not
actually use an infringing mark to be held liable for trademark
infringement. Instead, the wrongdoer’s
actions may be attributed to an innocent third party simply because of the
third party’s relationship to the infringer.
(Hard Rock Cafe Licensing Corp. v. Concession Services, Inc., supra,
955 F.2d 1143 at pp. 1148-1150.)
Under common law tort doctrine, vicarious
liability attaches
to a person who is free from fault but is required, by operation of law, to
bear the consequences of the actions of another who was at fault. (Roberts
v. Craig (1954) 124 Cal.App.2d 202, 208.)
This theory is usually applied in the context of respondeat superior,
where an employer is held liable for the torts of its employee (
41 Cal.3d 962, 967); to hold a principal liable for the torts of its agent
(Civ. Code, § 2338); and in the context of partnerships and joint ventures (
557, 569; Grant v. Weatherholt (1954)
123 Cal.App.2d 34, 46). We can find no case holding an innocent
independent contractor liable for the torts of its principal under a theory of
vicarious liability. And, the
allegations in the second amended complaint fail to state a basis for defendant
independent contractors to be bound by Re/Max’s conduct, based merely on their
financial participation in Re/Max’s advertising. Therefore, this cause of action fails to
state a claim for relief, and the order of dismissal must be affirmed.
2.
Misjoinder
Defendants
contend even if dismissal was improper under Chanel and Omega,
misjoinder provides an alternative basis for affirming the trial court’s
order. “If another proper ground for sustaining the demurrer
exists, this court will still affirm the demurrers even if the trial court
relied on an improper ground, whether or not the defendants asserted the proper
ground in the trial court.†(
Cal.App.4th 857, 880, fn. 10.)
Code of Civil
Procedure section 379,
subdivision (a) provides: “All persons
may be joined in one action as defendants if there is asserted against them:
[¶] (1) Any right to relief jointly, severally, or in the
alternative, in respect of or arising out of the same transaction, occurrence,
or series of transactions or occurrences and if any question of law or fact
common to all these persons will arise in the action; or [¶] (2) A
claim, right, or interest adverse to them in the property or controversy which
is the subject of the action.†“Demurrers
on the ground of misjoinder lie only when the defect appears on the face of the
complaint or matters judicially noticed†and the demurring parties are
prejudiced. (Royal Surplus Lines Ins. Co. v. Ranger Ins. Co. (2002) 100
Cal.App.4th 193, 198.)
Defendants rely
for support of their misjoinder argument upon Farmers Ins. Exchange v. Adams (1985) 170 Cal.App.3d 712 (
in Garvey v. State Farm Fire &
Casualty Co. (1989) 48 Cal.3d 395, 411, footnote 10. In Farmers,
an insurance company brought a declaratory relief action against hundreds of
insured homeowners seeking a determination that the homeowners’ claims for
damages caused by a storm were not covered by their policies. (Farmers,
at pp. 715-716.) The appellate
court upheld the homeowners’ challenge to the complaint based on misjoinder of
defendants, finding it “improper to label the damage herein to innumerable
types of structures, occurring at widely separated locations within the state,
resulting from a myriad of causes, and under various conditions as the ‘same
transaction or occurrence’ within the meaning of Code of Civil Procedure
section 379.†(Id. at p. 723.)
Unlike Farmers, here, there are common issues of law and fact, and the
claims arise from a series of transactions or occurrences, where defendants
improperly used plaintiff’s mark under similar circumstances. Unlike Farmers,
there were not vastly different injuries caused by each of the defendants. Moreover, defendants have pointed to no
prejudice in the joinder of all defendants in this action. (Cf. Anaya v. Superior Court (1984) 160 Cal.App.3d 228, 233 [joinder of
plaintiffs was proper in a case in which numerous employees and their
families sued an oil company for injuries due to chemical exposure over a
20- to 30-year period; “[t]he fact that each employee was not exposed on every
occasion any other employee was exposed does not destroy the community of
interest linking these [plaintiffs]â€].)
The
judgment of dismissal is reversed in part, and affirmed in part. The
trial court shall vacate its orders sustaining the demurrer and granting motion
for judgment on the pleadings without leave to amend as to the first, second,
third, fourth, sixth, and seventh causes of action, and shall enter a new order
sustaining the demurrer and granting motion for judgment on the pleadings as to
the fifth cause of action, without leave to amend, and overruling and denying
the motions as to the remaining causes of action. Appellant shall recover
its costs on appeal.
GRIMES, J.
WE CONCUR:
BIGELOW, P. J.
FLIER, J.
. . . shall establish a rebuttable presumption that the corporation has the
exclusive right to use as a trade name, in the state the corporate name set
forth in the articles or certificate, as well as any confusingly similar trade
name, if the corporation is the first to have filed the articles or obtained
the certificate containing the corporate name, and is actually engaged in a
trade or business utilizing that corporate name or a confusingly similar
name.†(Bus. & Prof. Code, §
14415.) The second amended complaint
does not allege “All Cities Realty†is the name set forth in its articles of
incorporation, and does not allege when the articles of incorporation were
filed. The second amended complaint
alleges only “Plaintiff is a corporation organized and existing under the laws
of the State of California and has its principal place of business in Orange County, State of California.â€
