LegalForce, Inc. v. LegalZoom.com, Inc.
3:18-cv-07274
| N.D. Cal. | Mar 13, 2019Background
- Trademarkia (doing business as Trademarkia) previously sued LegalZoom in a Central District action (First Action) alleging LegalZoom purchased and used the domain LegalZoomTrademarkia.com and diverted traffic, harming Trademarkia’s sales, market share, and goodwill.
- Trademarkia voluntarily dismissed the First Action and later filed the instant complaint alleging similar facts but asserting a different subsection of the Lanham Act.
- LegalZoom moved under Fed. R. Civ. P. 41(d) seeking fees for work in the First Action and a stay until those fees were paid.
- LegalZoom alternatively sought fees for the instant action under 28 U.S.C. § 1927 and under the court’s inherent power, arguing Trademarkia engaged in forum shopping by initially filing in the Central District.
- The Central District transferred the instant action to the Northern District; the Northern District (Judge Chesney) considered whether fees or sanctions were warranted and denied the motion in all respects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 41(d) authorizes awarding attorney fees for costs of the prior dismissed action | Trademarkia argued Rule 41(d) permits recovery of costs but does not authorize fees here because the underlying statute’s fee-shifting conditions were not met | LegalZoom argued Rule 41(d) authorizes awarding attorney fees incurred in the prior action | Denied: Court held Rule 41(d) may allow costs, but fees are recoverable only if the underlying statute so provides; Lanham Act fees require an "exceptional" showing under §1117(a), which LegalZoom did not make, so no award under Rule 41(d). |
| Whether §1927 permits sanctions for filing the initial complaint | Trademarkia argued filing the complaint was proper and not sanctionable | LegalZoom argued filing in Central District multiplied proceedings and forced transfer briefing, meriting §1927 sanctions | Denied: §1927 applies to multiplication of proceedings after litigation begins and cannot be applied to an initial pleading. |
| Whether the court’s inherent power supports sanctions for bad faith (forum-shopping) | Trademarkia argued voluntary dismissal and refiling are permitted; initial venue choice was reasonable | LegalZoom argued filing in Central District was forum-shopping and constituted bad faith warranting sanctions under the court’s inherent power | Denied: Court found initial filing in Central District was permissible and not in bad faith; no specific bad-faith finding. |
Key Cases Cited
- Esposito v. Piatrowski, 223 F.3d 497 (7th Cir. 2000) (interprets "costs" in Rule 41(d) consistent with American Rule and Marek; fees recoverable only if underlying statute so provides)
- Garza v. Citigroup, Inc., 881 F.3d 277 (3d Cir. 2018) (discusses split among circuits on whether Rule 41(d) permits fee awards and adopts Eleventh Circuit reasoning)
- Andrews v. America's Living Centers, LLC, 827 F.3d 306 (4th Cir. 2016) (adopts Eleventh Circuit approach regarding Rule 41(d) and fee recovery)
- Marek v. Chesny, 473 U.S. 1 (U.S. 1985) (construes "costs" in Rule 68 to exclude attorneys’ fees absent underlying statute authorizing them)
- SunEarth, Inc. v. Sun Earth Solar Power Co., 839 F.3d 1179 (9th Cir. 2016) (defines "exceptional" case standard for awarding fees under Lanham Act §1117)