APPLIED UNDERWRITERS, INC., a Nebraska corporation, Plaintiff-Appellant, v. LARRY J. LICHTENEGGER; J. DALE DEBBER; PROVIDENCE PUBLICATIONS, LLC, a California limited liability company, Defendants-Appellees.
No. 17-16815
United States Court of Appeals for the Ninth Circuit
January 15, 2019
D.C. No. 2:15-cv-02445-TLN-CKD
Appeal from the United States District Court for the Eastern District of California Troy L. Nunley, District Judge, Presiding
Argued and Submitted December 18, 2018 San Francisco, California
Filed January 15, 2019
Before: MILAN D. SMITH, JR. and JACQUELINE H. NGUYEN, Circuit Judges, and JANE A. RESTANI,* Judge.
Opinion by Judge Milan D. Smith, Jr.
SUMMARY**
Lanham Act / Civil Procedure
The panel affirmed the district court‘s dismissal of an action brought by a financial services company under the Lanham Act.
The panel held that the district court abused its discretion when it sanctioned the plaintiff and dismissed the case pursuant to
The panel nonetheless affirmed the district court‘s earlier dismissal for failure to state a claim under
COUNSEL
Kimberly A. Jansen (argued), Hinshaw & Culbertson LLP, Chicago, Illinois; Mark Suri, Peter Felsenfeld, Travis Wall, and Spencer Y. Kook, Hinshaw & Culbertson LLP, Los Angeles, California; for Plaintiff-Appellant.
Duffy Carolan (аrgued), Jassy Vick Carolan LLP, San Francisco, California; Kevin L. Vick and Jean-Paul Jassy, Jassy Vick Carolan LLP, Los Angeles, California; for Defendants-Appellees.
M. SMITH, Circuit Judge:
We are confronted with an appeal of a procedurally curious nature. Plaintiff-Appellant Applied Underwriters, Inc. (Plaintiff) appealed the district court‘s dismissal of its claims for trademark infringement and unfair competition, on the apparent belief that the court dismissed the complaint pursuant to
Although we cоnclude that the district court abused its discretion when it sanctioned Plaintiff and dismissed the case pursuant to
FACTUAL AND PROCEDURAL BACKGROUND
I. Factual Background
Plaintiff is “a financial services company that provides payroll processing services and, through affiliated insurance companies, offers programs through which workers’ compensation insurance is offered and provided to employers throughout the United States.” It began to use the “Applied Underwriters” mark in October 2001,
| Mark | Registration No. |
|---|---|
| APPLIED UNDERWRITERS | 2,651,867 |
| APPLIED UNDERWRITERS [with dog logo] | 2,777,687 |
| EquityComp | 2,781,677 |
| Equity Comp [with dog logo] | 2,777,688 |
| Applied Underwriters [with dog logo] | 2,812,457 |
In its complaint, Plaintiff asserted that these registrations are currently in force and uncontestable, and that it “aggressively advertises and promotes its marks and its services,” having “spent millions of dollars advertising” them.
Defendant Providence Publications, LLC publishes various online news
Plaintiff alleged that, beginning in November 2015, Defendants began offering a seminar (both online and on DVD) that “uses the APPLIED UNDERWRITERS and EQUITYCOMP marks in the title of the webcast.” The marks were also featured in various promotional materials, including a widely distributed email advertisement. Defendants used these marks “without Applied Underwriters’ authority or permission and in reckless disregard of [its] federal trademark registrations and its rights.” Plaintiff also claimed that Defendants “specifically and intentionally target[ed] their marketing and advertising . . . to independent brokers and the business organizations that they serve who use Plaintiff‘s services.” In its complaint, Plaintiff averred that “[a]s a result of the likelihood of confusion caused by Defendants’ unauthorized use of” the marks, “Defendants are able to attract customers who mistakenly believe that they will attend a program sponsored or affiliated with Applied Underwriters,” leading to dilution of the marks.
II. Procedural Background
Plaintiff filed a complaint asserting causes of action for federal trademark infringement and dilution, false
designation of origin under the Lanham Act, and federal and state unfair competition. The next day, Plaintiff filed a motion for a temporary restraining order, which the district court denied.
Defendants moved to dismiss under
On July 6, 2017, the district court granted Defendants’ motion to dismiss, concluding that “Defendants’ use of the Trademarks is nominative fair use.” At Plaintiff‘s request, the court granted leave to amend the complaint within 30 days. The district court docket confirms that Plaintiff neither filed an amended complaint (timely or otherwise) nor announced an intent not to do so. Consequently, on August 10, 2017, the district court issued a minute order that read: “In light of Plaintiff‘s failure to file an Amended Complaint pursuant to the Court‘s Order (ECF No. [31]), this case is hereby DISMISSED. CASE CLOSED.” The clerk of court
subsequently entered judgment “in accordance with the Court‘s Order filed on 8/10/2017.”
This appeal followed. In their briefs, Plaintiff and Defendants disputеd whether the district court dismissed Plaintiff‘s complaint pursuant to
this case for the limited purpose of allowing the district court to clarify whether the complaint was dismissed as a sanction under
Federal Rule of Civil Procedure 41 or for failure to state a claim underRule 12(b)(6) , and, if the final dismissal was intended as a sanction underRule 41(b) , to state the reasoningbehind the selection of that sanction.
Before oral argument in this appeal, the district court responded with a clarification order, in which it explained that it dismissed Plaintiff‘s complaint as a sanction pursuant to
STANDARD OF REVIEW AND JURISDICTION
“We review de novo a district court‘s dismissal of a complaint under [
dismissal of a complaint pursuant to
ANALYSIS
I. Rule 41(b)
Under
In the order clarifying its dismissal of Plaintiff‘s complaint, the district court analyzed the five factors that must be considered before dismissing a case pursuant to
191 F.3d at 990 (quoting Hernandez v. City of El Monte, 138 F.3d 393, 399 (9th Cir. 1998)).2 However, the district court did not consider whether
We are not the first panel to address this question. See, e.g., Yourish, 191 F.3d at 986 n.4 (“This approach is somewhat problematic because a plaintiff‘s failure to amend a complaint is not easily described as disobeying a court order because the plaintiff has the right simply to allow the complaint to be dismissed.“). Decades ago, the Fifth Circuit considered a similar factual sсenario and concluded that
[h]ad the District Judge intended what he wrote literally—that the action was being dismissed because the March order had been “disobeyed“—he would have been guilty of an abuse
of his Rule 41(b) discretion to dismiss. Dismissal of a case for disobedience of a court order is an exceedingly harsh sanction which should be imposed only in extreme cases, and then only after exploration of lesser sanctions. Failure to amend a complaint after it has been dismissed with leave to amend is not such an extreme
case of disobedience, if it is disobedience at all.
Mann v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 488 F.2d 75, 76 (5th Cir. 1973) (per curiam) (citations omitted). More recently, dissenting in Brown v. Rawson-Neal Psychiatric Hospital, Judge Graber concluded that a district cоurt‘s dismissal with prejudice under
the district court did not require Plaintiff to file an amended complaint, nor did the court require in the alternative that Plaintiff file an amended complaint or some other specified document. The court‘s order denying Plaintiff‘s motion for reconsideration merely granted leave to amend, with permissive text allowing Plaintiff to amend or not . . . .
Given the court‘s failure to cite
Rule 41(b) , the permissive wording of its orders, and Plaintiff‘s desire to obtain appellate review of theRule 12(b)(6) dismissal as discussed in the motion for reconsideration, he understandably hoped for a dismissal, which he reasonably thought would be underRule 12(b)(6) . After all, the district court never ordered Plaintiff tо file an amended complaint, as the courts had in Yourish or Ferdik. Leave to amend was granted; failure to amend did not constitute noncompliance with a court order. Simply put, there was no “ultimatum” within the meaning of our precedents, and so the district court abused its discretion in dismissing Plaintiff‘s federal claims underRule 41(b) .
840 F.3d at 1151 (Graber, J., dissenting).3
We agree with Judge Graber‘s reasoning. By its plain text, a
such order—the district court did not require that Plaintiff file an amended complaint following the initial
The district court‘s dismissal under
II. How to Proceed?
Having concluded that the district court abused its discretion when it dismissed Plaintiff‘s complaint as a sanction pursuant to
One option is to remand. Upon remand, the district court would presumаbly either again dismiss Plaintiff‘s complaint under
We conclude that remand would not serve the interest of judicial economy, and fortunately, it is not required. As the Supreme Court explained,
[I]n reviewing the decision of a lower court, it must be affirmed if the result is correct “although the lower court relied upon a wrong ground or gave a wrong reason.” The reason for this rule is obvious. It would be wasteful to send a case back to a lower court to reinstate a decision which it had already made but which the appellate court concluded should properly be based on another ground within the power of the appellate court to formulate.
SEC v. Chenery Corp., 318 U.S. 80, 88 (1943) (citation omitted) (quoting Helvering v. Gowran, 302 U.S. 238, 245 (1937)); see also Alcaraz v. Block, 746 F.2d 593, 602 (9th Cir. 1984) (“We will affirm the district court‘s correct legal results, even if reached for the wrong reasons.“). Here, we have before us the correct result; as discussed belоw, Defendants’ use of Plaintiff‘s marks constituted nominative fair use, and thus dismissal was required. We also have the district court‘s analysis in its
instead proceed with analysis of the district court‘s dismissal pursuant to
Defendants maintain, as the district court concluded, that their use of Plaintiff‘s marks constituted nominative fair use. We agree.
Pursuant to this defense, the “nominative use of a mark—where the only word reasonably available to describe a particular thing is pressed into service—lies outside the strictures of trademark law: Because it does not implicate the source-identification function that is the purpose of trademark, it does not constitute unfair competition.” New Kids on the Block v. News Am. Publ‘g, Inc., 971 F.2d 302, 308 (9th Cir. 1992).6 New Kids held that
a commercial user is entitled to a nominative fair use defense provided he meets the following three requirements: First, the product or service in question must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably neсessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.
Id. (footnote omitted). If the nominative use of a mark satisfies these three factors, then there is no infringement; “[i]f the nominative use does not satisfy all the New Kids factors, the district court may order defendants to modify their use of the mark so that all three factors are satisfied.” Toyota Motor Sales, U.S.A., Inc. v. Tabari, 610 F.3d 1171, 1176 (9th Cir. 2010).
Although Plaintiff‘s primary contention is that Defendants’ use of its marks failed to satisfy the third New Kids factor, it challenges the district court‘s conclusions as to all three. We will thus consider each factor in turn.
A. Whether Plaintiff‘s Service Was Readily Identifiable Without Use of the Trademarks
Plaintiff contends that “Defendants did not need to use Plaintiff‘s trademarks to identify their Program.” It concedes that “the Program apparently addresses Plaintiff‘s workers’ compensation product in particular,” but nonetheless argues that “Defendants could have come up with another readily understood generic or descriptive name.”
The email attached to the complaint demonstrates that Defendants’ seminar exclusively critiqued Plaintiff‘s EquityComp service. The title of the seminar was “Applied Underwriters’ EquityComp® Program Like it, Leave it, or Let it be?” and its subtitle read, “Learn the best strategies for selling, competing with, or helping a prospect out of EquityComp® mid-term.” We have previously determined that a descriptive alternative—such as Plaintiff‘s proposed “Risk Sharing Workers’ Comp Program” or “Captive Workers’
Toyota claims . . . the Tabaris could have used a domain name that did not contain the Lexus mark. It‘s true they could have used some other domain name like autobroker.com or fastimports.com, or have used the text of their website to explain their business. But it‘s enough to satisfy our test for necessity that the Tabaris needed to communicate that they specialize in Lexus vehicles, and using the Lexus mark in their domain names accomplished this goal.
610 F.3d at 1180; see also Playboy Enters., Inc. v. Welles, 279 F.3d 796, 802 (9th Cir. 2002) (“[T]here is no other way that Ms. Welles can identify or describe herself and her services without venturing into absurd descriptive phrases. To describe herself as the ‘nude model selected by Mr. Hefner‘s magazine as its number-one prototypical woman for the year 1981’ would be impractical as well as ineffectual in identifying Terri Welles to the public.“).7
Such is the case here. The seminar did not discuss workers’ compеnsation programs generally, but rather Plaintiff‘s specific offering. Therefore, Defendants “needed to communicate” that they critiqued the EquityComp program, and so using the mark in the title and description of the program “accomplished this goal.” Toyota Motor Sales, 610 F.3d at 1180.
In its reply brief, Plaintiff makes the argument that, even if the use of the “EquityComp” mark satisfied the first New Kids factor, the use of the “Applied Underwriters” mark did not. Plaintiff suggests that “[t]he addition of the ‘Applied Underwriters’ mark does nothing to identify the content of the seminar but instead serves solely to create the impression
that Applied Underwriters is sponsoring or endorsing a seminar about its own EquityComp® product.” It rеlies on Playboy Enterprises, in which we determined that while use of the trademarked phrase “Playboy Playmate of the Year 1981” was permissible because it was needed for identification purposes, use of another potentially protected phrase—“PMOY ‘81“—was not. 279 F.3d at 804. We reasoned that “[t]he repeated depiction of ‘PMOY ‘81’ is not necessary to describe Welles. ‘Playboy Playmate of the Year 1981’ is quite adequate.” Id. Here, similarly, Plaintiff suggests that the “EquityComp” mark identified the service that Defendants analyzed in their seminar, and thus the “Applied Underwriters” mark did not serve that function. But this argument falls short. Defendants’ use of the “Applied Underwriters” mark was not nеcessarily redundant because it was used to identify the company that offered EquityComp—a company that was itself critiqued in the seminar. We therefore find this case distinguishable from Playboy Enterprises, where use of the “PMOY ‘81” mark served no additional identification purpose.
B. Whether Defendants Used Only So Much of the Trademarks As Was Reasonably Necessary
Plaintiff argues that Defendants’ use of its marks failed the second factor because the email attached tо the complaint featured several uses of both marks. That argument relies on a misunderstanding of this factor. The second New Kids factor does not implicate the number of uses of a mark, but rather the nature of the uses. In clarifying it, we explained that “a soft drink competitor would be entitled to compare
its product to Coca-Cola or Coke, but would not be entitled to use Coca-Cola‘s distinctive lettering.” New Kids, 971 F.2d at 308 n.7; see also Playboy Enters., 279 F.3d at 802 (“Welles’ banner advertisements and headlines satisfy this element because they use only the trademarked words, not the font or symbols associated with the trademarks.“); Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d 350, 352 (9th Cir. 1969) (noting that defendant “did not use Volkswagen‘s distinctive lettering style or color scheme, nor did he display the encircled ‘VW’ emblem“); cf. Toyota Motor Sales, 610 F.3d at 1181 (“Toyota suggests that use of the stylized Lexus mark and ‘Lexus L’ logo was more use of the mark than necessary and suggested sponsorship or endorsement by Toyota. This is true: The Tabaris could adequately communicate their message without using the visual trappings of the Lexus brand.“). Our case law demonstrates that analysis of this factor should focus not on the number of uses of Plaintiffs’ marks, but on whether Defendants used more of each individual mark than was necessary in terms of font and stylization.
Here, Defendants correctly note that the email “did not use any part of Plaintiff‘s service marks, the distinctive lettering or design; rather they used only the term ‘Applied Underwriters’ and ‘EquityComp’ in describing its webcast.” The email did not contain, for example, the illustration of a St. Bernard or the stylized lettering of Plaintiff‘s registered marks. It did not even employ the distinctive small-caps rendering of the “APPLIED UNDERWRITERS” and “EQUITYCOMP” marks. Defendants used only the words themselves, which were, as discussed above, necessary to identify Plaintiff‘s product. Therefore, the second New Kids factor was satisfied.
C. Whether Use of the Trademarks Suggested Sponsorship or Endorsement
Plaintiff asserts that, “[s]imply put, Defendants’ advertising creates confusion.”
At the outset, it claims that “[t]he district court erred by ignoring Plaintiff‘s evidence of actual confusion in its Order, which nowhere mentions the actual confusion.” However, in its complaint, Plaintiff pleaded no such facts of actual confusion. Instead, the complaint stated only that “Defendants’ improper use of the APPLIED UNDERWRITERS IP has caused, and will continue to cause, damaging and actual confusion among the public.” That conclusory statement constituted the only evidence of confusion contained in the complaint, and at no other point did Plaintiff plead facts suggesting that use of its marks led consumers to assume that it sponsored or endorsed Defendants’ seminar.8
“EquityComp is the registered trademark of Applied Underwriters, Inc.”9 Moreover, in the body of the email (and on the DVD cover), the title of the seminar—which did feature both the “Applied Underwriters” and “EquityComp” marks—was in regular font beneath a stylized logo for WCE:
AWARD WINNING WORKERS’ COMP EXECUTIVE CREDIBLE AUTHORITATIVE TRUSTWORTHY
Applied Underwriters’ EquityComp® Prоgram Like it, Leave it, or Let it be?
This further suggested that it was WCE—not Plaintiff—that sponsored the seminar, which discounts the possibility of any confusion.
Furthermore, Defendants correctly argue that any likelihood of confusion is implausible due to the content of
the email and the seminar itself. The text of the email referred to EquityComp as a “sophisticated yet controversial program,” and Lichtenegger was billed as a lawyer who “for 15 years has specialized in Investment and Commercial Fraud recovery” and “represents a panoply of employers vs Applied and is well versed in their math and how their program works.” Debber, for his part, was credited аs the person “who broke the recent spate of stories about Applied Underwriters’ EquityComp Program. Only that other mild mannered reporter, Clark Kent, exceeds Dale‘s commitment to ‘Truth, Justice and the American Way.‘” The seminar‘s subtitle advertised that users can “[l]earn the best strategies for . . . helping a prospect out
We have held that criticism of a product tends to negate the possibility of confusion as to sponsorship and endorsement. See New Kids, 971 F.2d at 308–09 (“[N]othing in the announcements suggests joint sponsorship or endorsement by the New Kids. The USA Today announcement implies quite the contrary by asking whether the New Kids might be ‘a turn off.‘“).11 Here, it
was clear from the text of the email that the seminar was a critique of Plaintiff‘s program, and it is simply not plausible that it could have been construed as anything else.
It is true, as Plaintiff notes, that “[t]he existence of consumer confusion is a fact-intensive analysis that does not lend itself to a motion to dismiss.” See, e.g., Williams v. Gerber Prods. Co., 552 F.3d 934, 938–39 (9th Cir. 2008). Even so, based on the critical nature of the presentation, the disclaimer included in the text, and the fact that Defendants advertised the seminar under the WCE banner, we cannot conclude that a “reasоnably prudent consumer” in the relevant marketplace, Toyota Motor Sales, 610 F.3d at 1176, could have interpreted Defendants’ seminar as being endorsed or sponsored by Plaintiff. The complaint contained only scant, conclusory allegations of consumer confusion, which, even when considered in the light most favorable to Plaintiff, were belied by the allegedly infringing email attached to the complaint, which demonstrated nominative fair use. Although Plaintiff introduced additional evidence that might change this conclusion in its opposition to Defendants’ motion to dismiss, those additional facts cannot be considered because they were not inсluded in the operative pleading. The third New Kids factor was therefore satisfied.
D. Summation
Although it is a “rare situation in which granting a motion to dismiss is appropriate” when a case involves questions of consumer confusion, Williams, 552 F.3d at 939, the district court properly concluded that Plaintiff failed to state claims for which relief could be granted because, on the face of the complaint, it was clear that Defendants’ alleged infringement constituted nominative fair use.
CONCLUSION
We conclude that the district court abused its discretion when it dismissed Plaintiff‘s complaint as a sanction pursuant