BILLFLOAT INC., DBA SmаrtBiz Loans, a Delaware corporation, Plaintiff-Appellant / Cross-Appellee, v. COLLINS CASH INC., DBA Smart Business Funding, a New York corporation; ABRAHAM COHEN, Defendants-Appellees / Cross-Appellants.
Nos. 23-15405, 23-15470
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
July 1, 2024
D.C. No.3:20-cv-09325-EMC
FOR PUBLICATION
OPINION
Argued and Submitted March 11, 2024 San Francisco, California
Filed July 1, 2024
Before: Sidney R. Thomas, M. Mаrgaret McKeown, and Morgan Christen, Circuit Judges.
Opinion by Judge McKeown
SUMMARY*
Lanham Act
The panel affirmed (1) the district court‘s judgment, after a jury trial, in favor of the defendants in an action under the Lanham Act and (2) the district court‘s order partially denying defendants’ motion for attorneys’ fees.
BillFloat, Inc., the user of the “SmartBiz” trademark, alleged infringement by Collins Cash, Inc., the user of the “Smart Business Funding” mark and BillFloat‘s former business partner.
The panel held that the district court did not abuse its discretion in admitting Collins Cash‘s likelihood-of-confusion survey as expert evidence under
The district court also did not abuse its discretion in declining to instruct the jury that it should not draw any inferences from BillFloat‘s lack оf a similar survey.
On cross-appeal, the panel held that the district court did not abuse its discretion in denying Collins Cash‘s motion for attorneys’ fees for the trademark infringement claim, either under the parties’ partnership agreement or under the Lanham Act. The panel concluded that the trademark claim did not relate to the partnership аgreement, and the case was not “exceptional” under the Lanham Act.
* This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.
COUNSEL
Jesse A. Salen (argued) and Martin R. Bader, Sheppard Mullin Richter & Hampton LLP, San Diego, California; Todd E. Lundell, Sheppard Mullin Richter & Hampton LLP, Costa Mesa, California; Karl S. Kronenberger, Kronenberger Rosenfeld LLP, San Francisco, California; for Plaintiff-Appellant.
Gordon E. Gray, III (argued), Joseph A. Mandour, III, and Ben Lila, Mandour & Associates APC, Los Angeles, California, for Defendants-Appellees.
McKEOWN, Circuit Judge:
This cross-appeal arises from a trademark infringement suit brought by BillFloat, the user of the “SmartBiz” mark, against Collins Cash, the user of the “Smart Business Funding” mark. After a four-day trial, a jury found no likelihood of confusion between the marks. BillFloat appeals the district court‘s decision to admit Collins Cash‘s likelihood-of-confusion survey, and the district court‘s refusal to instruct the jury that it should not draw any inferences from BillFloat‘s lack of a similar survey. Collins Cash appeals the district court‘s denial of fees and costs for the trademark infringement claim, and denial of costs for the contract claim, under both the parties’ partnership agreement and the Lanham Act. We affirm.
I. BACKGROUND
BillFloat and Collins Cash are both providers of small business financing, though they operate with slightly different business models. BillFloat provides Small Businеss Administration and other loans to small businesses. It generates business primarily from referrals to and from its largest partners, typically financial institutions. Collins Cash is a much smaller company that primarily deals in merchant cash advances, with ninety percent of its business done through broker referrals. In 2013, BillFloat began using the “SmartBiz” mark on its website and in other materials аnd registered the mark in 2014. In late 2014, Collins Cash began using the “Smart Business Funding” mark, though it did not file an application to register that mark until 2020.
In 2018, BillFloat and Collins Cash entered into a partnership agreement. Under the agreement, Collins Cash would introduce BillFloat‘s product, SmartBiz, to current and prospective customers and refer them to BillFloat for small-business loans; BillFloat would then take over and help the customer apply for a loan. Upon approval of the loan, BillFloat would pay Collins Cash a small percentage of the loan principal as a referral fee. The parties also agreed that “[i]f either Party employs attorneys to enforce any right arising out of or relating tо this Agreement, the prevailing Party shall be entitled to recover reasonable attorneys’ fees.”
In 2020, after learning of Collins Cash‘s use of the “Smart Business Funding” mark, BillFloat sent Collins Cash a series of cease-and-desist letters, culminating in this suit. BillFloat brought claims for federal and state trademark infringement, breach of contract, unfair competition, and unlawful business practices. After the district court granted summary judgment to Collins Cash on the breach-of-contract claim, the parties proceeded to trial on the trademark infringement claim.1
BillFloat sought to exclude Keegan and his survey from trial, arguing that variоus errors made his survey unreliable and thus inadmissible. The district court denied the motion to exclude and admitted Keegan‘s testimony and the survey at trial. The district court also admitted testimony from BillFloat‘s expert, Melissa Pittaoulis, to explain the errors in Keegan‘s survey. Both experts were extensively cross-examined on their qualifications and the claimеd shortcomings of Collins Cash‘s survey. After a four-day trial, the jury found that BillFloat had not established trademark infringement by a preponderance of the evidence.
Post-trial, BillFloat moved for judgment as a matter of law and for a new trial, and Collins Cash filed a motion for attorneys’ fees and non-taxable costs. The district court denied BillFloat‘s motion and аwarded Collins Cash attorneys’ fees under the partnership agreement for the breach of contract claim, but declined to grant attorneys’ fees for the trademark infringement claim, and denied non-taxable costs for both claims.
II. BILLFLOAT‘S APPEAL
Under
Collins Cash‘s expert, Mark Keegan, has two decades of еxperience designing and executing over 1,000 consumer surveys, has testified as an expert at five federal trials (including this one), and has been deposed as an expert in thirty cases. The survey he designed in this case follows what is known as the “Squirt” survey format, an accepted survey methodology in cases where likelihood of confusion between
BillFloat points out various issues with the survey, such as the over- and under-inclusiveness of the respondent universe, Keegan‘s failure to include a separate control group, and the control stimuli Keegan picked, which were real webpages for other small-business loan companies.2 These challenges to methodology аnd design are precisely the kind of claimed deficiencies that go to the weight of the evidence, not its admissibility. See Fortune Dynamic, 618 F.3d at 1037-38. The district court did not abuse its discretion when it concluded that these “follow-on issues of survey design” did not render the survey unreliable and
thus inadmissible.3 Clicks Billiards, 251 F.3d at 1263. BillFloat was welcome to argue—and did argue through its expert at trial—that Keegan‘s survey should be accorded minimal weight due to these shortcomings.
Similarly, the district court did not abuse its discretion when it declined to give BillFloat‘s requested jury instruction. See Skidmore as Tr. for Randy Craig Wolfe Tr. v. Led Zeppelin, 952 F.3d 1051, 1065 (9th Cir. 2020). BillFloat requested the following instruction:
You have received market survey evidence from Defendants in this case. However, you should not draw any inference about the existence or absence of consumer confusion from the fact that Plaintiff did not also offer market survey evidence.
In support, BillFloat cites three cases that stand for the routine proposition that a plaintiff should not be automatically penalized for failing to present evidence that is not required. See Midwestern Pet Foods, Inc. v. Societe des Produits Nestle S.A., 685 F.3d 1046, 1054 (Fed. Cir. 2012) (declining to “infer from Nestle‘s failure to provide
survey evidence that such evidence would be harmful“); Swagway, LLC v. Int‘l Trade Comm‘n, 934 F.3d 1332, 1340 (Fed. Cir. 2019) (declining to draw an “adversе inference” from Segway‘s failure to conduct a survey); San Diego Comic Convention v. Dan Farr Prods., 336 F. Supp. 3d 1172, 1185 (S.D. Cal. 2018) (rejecting argument that the plaintiff‘s failure to conduct a survey “demonstrate[d] that confusion is not likely“). But BillFloat‘s contention that the jury was not permitted to draw any inference at all from the absence of survey evidence proffered by BillFloat—goes too far. If nothing else, the jury was frеe use its common sense and experience
Finally, even if we were to countenance BillFloat‘s arguments that the district court erred by admitting Keegan‘s survey or omitting its requested instruction, there was no prejudicial error that warrants reversal. See M2 Software, Inc. v. Madacy Ent., 421 F.3d 1073, 1087 (9th Cir. 2005). BillFloat presented little evidence that its “SmartBiz” mark was particularly strong in its industry. The companies provide slightly different services and rely on different referral partners, many of which tend to be more sophisticated than the average consumеr and thus less likely to confuse the two companies. BillFloat‘s proffered evidence of actual confusion—six isolated emails in a universe of Collins Cash‘s 40,000-50,000 emails from potential customers in a year—was minimal. Even putting aside Collins Cash‘s survey and BillFloat‘s decision not to proffer its own survey, a jury could easily have concluded based on the other evidence at trial that there was no likelihood of confusion between the two marks.
III. COLLINS CASH‘S APPEAL
Collins Cash contends that the district court erred in denying its motion for attorneys’ fees for the trademark infringement claim, either under the parties’ partnership agreement or the Lanham Act. We review this issue for abuse of discretion. See Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 898–99 (9th Cir. 2006) (state law); SunEarth, Inc. v. Sun Earth Solar Power Co., 839 F.3d 1179, 1181 (9th Cir. 2016) (en banc) (per curiam) (Lanham Act).
The parties’ рartnership agreement contains the following provision regarding governing law and attorneys’ fees:
The Parties agree that this Agreement shall be governed by and construed in accordance with the laws of the State of California . . . . If either Party employs attorneys to enforce any right arising out of or relating to this Agreement, the prevailing Party shall be entitled to recover reasonable attorneys’ fees.
Collins Cash argues that BillFloat “admit[ted]” that its trademark infringement claim “relat[es] to” the partnership agreement because BillFloat also brought a claim for breach of contract in this case. But as the district court noted in its order granting summary judgment on the contract claim, the contract concerned only uses of BillFloat‘s “SmartBiz” mark by Collins Cash, not any other purportedly infringing marks. Thus, the complaint does not constitute an “admission” that BillFloat‘s trademark infringement claim is “related to” its breach of contract claim.
Nor does the trademark infringement claim “arise out of” or “relate to” the contract under California law. A suit arises out of an agreement if the claims at issue “arose from the underlying transactional relationship between the parties, as memorialized by the[ir] . . . [a]greement.” Xuereb v. Marcus & Millichap, Inc., 5 Cal. Rptr. 2d 154, 159 (Cal. Ct. App. 1992). If a claim is “quite independent of the basic contractual arrangement,” then it does not arise out of the contract. Id. (quoting Malibou Lake Mountain Club, Ltd. v. Smith, 95 Cal. Rptr. 553, 556 (Cal. Ct. App. 1971)). Similarly, “[c]onsistent with the propositiоn that ‘relating to’ acquires meaning from the subjects being related, the phrase normally encompasses extracontractual claims only ‘so long as they have their roots in the relationship between the parties which was created by the contract.‘” Vaughn v. Tesla, Inc., 303 Cal. Rptr. 3d 457, 466 (Cal. Ct. App. 2023) (quoting Berman v. Dean Witter & Co., Inc., 119 Cal. Rptr. 130, 133 (Cal. Ct. App. 1975)). The trademark infringement claim is totally independent of the parties’ partnership agreement. As the district court noted, the claimed trademark infringement arose at least four years earlier, required different proof, and did not share underlying facts or common issues. As such, the district court did not abuse its discretion when it denied Collins Cash attorneys’ fees for the trademark infringement claim under the parties’ partnership agreеment.4
Nor did the court abuse its discretion in denying fees under the Lanham Act. The Lanham Act allows an award of attorneys’ fees in “exceptional cases.”
Collins Cash cites a litany of complaints about BillFloat‘s “meritless” claims and its “unreasonable” litigation conduct, none of which convince us that the district court erred here. While the Sleekcraft infringement factors largely came out in Collins Cash‘s fаvor, the claim was hardly “meritless,” and a positive result does not transform a trademark claim into an “exceptional case.” And while the district court granted summary judgment to Collins Cash on BillFloat‘s breach of contract claim, a dismissal of a single claim at summary judgment (particularly where another claim goes to trial) does not render a case exceptional. See Octane Fitness, 572 U.S. at 553-54 (defining “exceptional” as “uncommon,” “rare,” or “not ordinary“). Collins Cash also argues that BillFloat‘s unfair competition claim was “invalid as a matter of law,” yet Collins Cash did not move to dismiss that claim; instead, BillFloat voluntarily dismissed the claim before trial.
Finally, Collins Cash‘s complaints about BillFloat‘s litigation conduct—its fаilure to offer evidence of a pre-
litigation investigation, a six-month delay between learning of the alleged infringement and sending the first cease-and-desist letter, producing 98,000 documents without an index, and copious objections during the deposition of BillFloat‘s CEO—do not rise to the kind of egregious litigation tactics that make a case “exceptional” under the Lanham Act. See, e.g., Nutrition Distrib. LLC v. IronMag Labs, LLC, 978 F.3d 1068, 1081 (9th Cir. 2020) (holding no abuse of discretion in denying fees in part because the movant failed to tender “proof that [the infringer] had engaged in litigation misconduct or violated the district court‘s injunction“); cf. Jason Scott Collection, Inc. v. Trendily Furniture, LLC, 68 F.4th 1203, 1223–24 (9th Cir. 2023) (holding that the district court did not abuse its discretion by concluding that “willful and brazen infringement,” including “an attempt to circumvent the full force of [an] injunction,” “constitute[d] an exceptional
AFFIRMED.