EXPRESS, LLC v. FETISH GROUP, INC. No. CV 05 2931 JTLx.
464 F.Supp.2d 965 (2006)
EXPRESS, LLC, a Delaware limited liability corporation, Plaintiff, v. FETISH GROUP, INC., a California corporation, Defendant.
United States District Court, C.D. California.
September 5, 2006.
Lynda Zadra-Symes, Diane Reed and David Jankowski of Knobbe, Martens, Olson & Bear, Irvine, for Fetish Group, Inc.
Frank Colucci of Colucci & Umans, New York and Diana Torres, O'Melveny & Myers, Los Angeles, for Express LLC.
ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT 
WILSON, District Judge.
This case originated as a copyright dispute over a camisole. Plaintiff Express,
After investigating Fetish's copyright claims, and discovering that the lace used in the tunic was in the public domain, Express resumed sales of its Long Camisole. Express also filed suit for damages and declaratory relief. Counts I & II of Express' complaint included claims under the Copyright Act of 1976, Count III claims that Fetish fraudulently misrepresented the scope of its copyright, and Count TV claims that Fetish committed an unlawful or unfair business practices in violation of the Cal. Bus. & Prof.Code § 17200.
Fetish filed an answer and a counterclaim alleging that Express infringed its copyright. In an Order issued on March 27, 2006 ("Order"), this Court found that Fetish's GH268 tunic deserved thin copyright protection, the Express Long Camisole is substantially similar to the GH268 Tunic, and therefore Express infringed Fetish's copyright in the GH2658 tunic. (Order at 31.) On July 19, 2006, Fetish filed a motion for summary judgment on Express' fraud and unfair business practices claims (Counts III & IV).
As more fully described below, the Court GRANTS Fetish's motion for summary judgment. The Court GRANTS Fetish's motion on Count III (fraud) because Express has failed to point to evidence sufficient to present a triable issue of fact with respect to the element of damages. Similarly, the Court GRANTS Fetish's motion on Count IV (unfair business practices) because Express has failed to point to evidence sufficient to present a triable issue of fact of harm or damages.
Fetish designs, manufactures, and distributes, distinctive, high-quality clothing throughout the United States and around the world. Fetish's co-owner, Michele Dahan ("Dahan"), is the principal designer for Fetish. She designs a women's clothing line for Fetish under the brand name "Gold Hawk." In 2003, Dahan allegedly designed a tunic for the Gold Hawk collection known internally at Fetish as the GH268 tunic ("GH268 Tunic").
In preparation for the Spring 2005 season, which runs from February to July, Express ordered approximately 298,559 units of a thigh-length camisole ("Express Long Camisole") from its manufacturers in ten different spring colors.
In February 2005, Fetish's counsel informed Express' counsel that the Express Long Camisole violated Fetish's copyright in the GH268 Tunic. Shortly thereafter, Express removed its Long Camisole from all of its approximately 792 stores nationwide and placed it in inventory. (Stevens Supp. Decl. Ex. 1 ¶ 11-12).
On March 4, 2005, Fetish applied to register its copyright in the GH268 Tunic with the United States Copyright Office ("Copyright Office"). Fetish filed two applications on the same day, both signed by Fetish's President, Raphael Sabbah. The first application was for a work entitled "Lace Tunic GH268." (Sabbah Decl. ¶ 5, Ex. 1) Fetish described the "nature of the work" as a "garment with lace and embroidery design." (Id.) The second application was for a work entitled "Lace with
The Copyright Office accepted the first application, but deleted the phrase "garment with" from the application "because this phrase implied [a] claim in an item of wearing apparel." (Id. at ¶ 9, Ex. 3.) The Copyright Office denied the second application because it viewed the "lace design" in the second work as the "same" as the first. (Id.)
After learning of Fetish's copyright, Express contacted its manufacturers in the Far East to determine the origin of the lace trim that had been used in the production of the Express Long Camisole. After concluding that the lace trim used in the Express Long Camisole was in the public domain, Express confronted Fetish's counsel with this information before filing suit.
On April 21, 2005, Plaintiff Express filed a complaint for declaratory relief, fraud, and unfair competition. Defendant Fetish filed an answer, hi which Fetish asserted several affirmative defenses as well as a counterclaim of federal copyright infringement against Express.
On May 19, 2005, Fetish filed a supplemental registration which added the following information in section 6(a) ("Preexisting Material") of the VA copyright form: "The lace trim on the garment is preexisting material and Claimant claims no copyright in the lace trim." (Sabbah Decl. ¶ 12, Ex. 4.) On May 25, 2005, Fetish further amended its registration by adding the phrase "new design on garment" to section 6(b) ("Material Added to this Work"). (Id.)
Fetish moved for summary judgment on its counterclaim for copyright infringement, and on March 27, 2006, this Court issued an order granting Fetish's motion. The Court held that Fetish has a valid registered copyright, the copyright registration is at least as broad as the embroidery design, the embroidery design is original enough to deserve thin copyright protection, and the Express Long Camisole and the GH268 Tunic are virtually identical.
On July 19, 2006, Fetish moved for summary judgment regarding Counts III and IV of Express's complaint. Count III of Express' complaint alleges that Fetish fraudulently misrepresented the scope of its copyright in the GH268 Tunic. Specifically, Express alleges that Fetish made false representations that Fetish is the creator of the lace and that Express had no right to manufacture or sell any garment bearing the lace, thus inducing Express to pull its Long Camisole from the market. (Complaint ¶ 40.) Count IV of Express's complaint alleges that Fetish's alleged misrepresentations constitute unfair business practices in violation of Cal. Bus. & Prof.Code § 17200. For the reasons discussed below, this Court GRANTS Fetish's motion.
Express alleges that Fetish committed fraud (Count III) and committed unfair business practices in violation of Cal. Bus. & Prof.Code § 17200 (Count IV) when it misrepresented the scope of its copyright. Specifically, Express argues that Fetish intentionally misrepresented that it created the lace trim used on the GH268 Tunic and .held a copyright to the lace trim. Express claims that it relied on this misrepresentation and as a result withdrew its Long Camisole from the market during the height of the spring 2005 season, causing substantial financial losses.
Fetish argues that Express cannot prove the elements of a fraud cause of action or an unfair business practice and therefore seeks summary judgment with respect to Counts III and IV of Express' complaint. Specifically, Fetish alleges
As discussed below, the Court finds that there is no genuine issue of material fact with respect to damages. Because Express has the burden of proof for this element, Fetish is entitled to summary judgment as a matter of law. The Court is assuming, without deciding, that Express could have satisfied the other elements in its claims, but need not address those elements because of Express' failure to establish a triable issue of fact concerning damages.
A Summary Judgment
Federal Rule of Civil Procedure 56(c) requires summary judgment for the moving party when the evidence, viewed in the light most favorable to the nonmoving party, shows that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Tarin v. County of Los Angeles,
The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. See Celotex Corp., 477 U.S. at 323-24, 106 S.Ct. 2548. That burden may be met by "`showing that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Id. at 325, 106 S.Ct. 2548. Once the moving party has met its initial burden, Rule 56(e) requires the nonmoving party to go beyond the pleadings and identify specific facts that show a genuine issue for trial. See id. at 323-24, 106 S.Ct. 2548; Anderson v. Liberty Lobby, Inc.,
B. Count III: Fraud
Express argues that Fetish fraudulently and intentionally misrepresented that it created the design of the lace trim in order to induce Express to pull its Long Camisole from the market during the spring 2005 season, causing Express significant financial losses.
California Civil Code § 1709 provides a cause of action for "fraudulent deceit." To prevail on a claim of fraud, a plaintiff must establish: (1) misrepresentation, (2) scienter or knowledge of its falsity, (3) intent to induce reliance (intent to defraud), (4) actual, detrimental, and justifiable reliance, and (5) resulting damage. Hinesley v. Oakshade Town Ctr.,
Although Express' arguments concerning the damages it seeks are vague,
1. Damages for Lost Profits
a. Fetish Points to an Absence of Evidence of Damages
The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. See Celotex Corp., 477 U.S. at 323-24, 106 S.Ct. 2548. That burden may be met by "`showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Id. at 325, 106 S.Ct. 2548.
Fetish argues that the Express did not suffer any damages because Express would have had to pull its Long Camisoles despite the misrepresentation because Express' Long Camisole infringed Fetish's thin copyright. Where damages "were otherwise inevitable or due to unrelated causes," no liability attaches, Goehring v. Chapman Univ.,
Just as in Goehring and Kruse, Express' alleged damages were inevitable and the result of its own actions rather than Fetish's misrepresentations. Even though Fetish did not hold a copyright to the lace trim pattern, Express' Long Camisole still infringed Fetish's "thin copyright" based on the embroidery design because the camisoles are "virtually identical." (Order at 30.) Therefore, regardless of Fetish's misrepresentations about the lace, Express was still barred from selling its infringing Long Camisole, and therefore Express did not suffer any lost profits. The Court finds that Express cannot simply claim that it lost money because it was unable to sell infringing tunics. Fetish has met its initial burden under Rule 56(e) by showing an absence of a genuine issue of material fact.
b. Express fails to identify any specific facts to show it suffered damages
Once the moving party has met its initial burden, Rule 56(e) requires the nonmoving party to go beyond the pleadings and identify
Express argues that its reliance on Fetish's misrepresentation caused significant lost profits in the spring of 2005. Express essentially argues that, but for the misrepresentation, Express could have taken actions short of pulling the Long Camisole from the market for the entire three months, and as a result, Express' lost profits could have been mitigated. As evidence of lost profits, Express points to the following statements in the declarations of Kenneth Stevens, Express' CEO:
Additionally, Frank Colucci, Express' lawyer, states in a declaration that if Fetish had not misrepresented that it possessed a copyright to the lace trim, he might have taken the following actions:
(Colucci Supp. Decl ¶ 42.)
Declarations submitted in conjunction with summary judgment proceedings must comply with the following requirements: (1) be based on personal knowledge;
As discussed below, the statements in Express' declarations are not evidence of damages because each statement suffers from at least one of four fatal flaws: (1) lack of relevance, (2) excessive speculation, (3) generalization rather than specification, and (4) lack of foundation of personal knowledge.
i. Stevens' Statements are not Relevant in Determining Whether Express Suffered Damages
Stevens' statements concerning the losses Express suffered when it pulled its Long Camisole from the market are irrelevant to the issue of whether Express suffered damages as a result of Fetish's alleged fraud. Regardless of Fetish's representations concerning the lace trim, Express had to pull its Long Camisole from the market because it infringed Fetish's copyright. (Order at 31.) These losses were the inevitable result of Express' infringement, and Express cannot claim them as damage from the alleged fraud.
Colucci's statements are relevant because they suggest that Express might have been able to mitigate its losses if Fetish had not made a fraudulent representation. The deprivation of an oportunity to mitigate such a loss would constitute damages if evidence existed to support such allegations. However, the only statements to support such allegations are the statements by Colucci, and these statements are not admissible evidence as explained below.
ii. Colucci's Statements are too Speculative to be Admissible as Evidence of Damages
The Court recognizes that "the fact that the amount of damage may not be susceptible of exact proof or may be uncertain, contingent or difficult of ascertainment does not bar recovery." Marsu, B.V. v. Walt Disney Co.,
The thrust of Colucci's statements in ¶ 42 is the following three propositions: (1) if Fetish had not made a fraudulent misrepresentation, Colucci may have recommended several different courses of action; (2) Express could have mitigated its lost profits from the Long Camisoles by taking one of Colucci's suggested courses of action;
Colucci essentially admits that his hypothetical recommendations are mere speculation when he states "since Fetish asks this Court to speculate what would have happened had Fetish told the truth . . . I would [have recommended the following courses of action.]" (Colucci Supp. Decl. ¶ 42.) Moreover, in order for the Court to find that Colucci's statements are evidence of damages, it must infer that the hypothetical actions recommended by Colucci would have helped mitigate Express' losses. Making this inference would require the Court to engage in an impermissible degree of speculation,
The Court recognizes that it is possible that these courses of action might have reduced Express' losses on the Long Camisoles. For example, declarations by manufacturers, management, or industry experts about the feasibility of Colucci's recommended actions might have demonstrated that Colucci's recommendations would have helped Express mitigate its losses. However, Rule 56(e) requires that the nonmoving party go beyond the pleadings and identify specific facts that show a genuine issue for trial. See Celotex, 477 U.S. at 323-24, 106 S.Ct. 2548; Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Absent any facts other than Colucci's speculative statements, the Court finds that Express has failed to show a genuine issue for trial concerning damages.
iii. Colucci's Identification of Specific Facts is too Generalized to Satisfy FRCP 56(e)
Submitted as evidence of damages, Colucci's statements in ¶ 42 are too generalized to satisfy Federal Rule of Civil Procedure 56(e) which requires that affidavits set forth specific facts. Lujan v. National Wildlife Federation is instructive in discerning how "specific" the "specific facts" must be under Rule 56(e). 497 U.S. at 879, 110 S.Ct. 3177.
In Lujan, the plaintiff organization alleged that its members had been, or were threatened to be, harmed by the land withdrawal review program of the Bureau of Land Management. 497 U.S. at 871, 110 S.Ct. 3177. In support of their allegations, Plaintiff submitted affidavits by two of its members. Id. at 886, 110 S.Ct. 3177. One affidavit stated that the individual's "recreational use and aesthetic enjoyment of federal lands, particularly those in the vicinity of South Pass-Green Mountain, Wyoming have been and continue to be adversely affected in fact by the unlawful actions of the [government]." Id. (internal quotation marks omitted). Similarly, in the other
The District Court granted summary judgment in favor of the government after finding that "the [first] affidavit on its face contains only a bare allegation of injury and fails to show specific facts supporting the affiant's allegation," and that the second affidavit was similarly flawed. Id. at 887, 110 S.Ct. 3177. Although the Court of Appeals disagreed with the District Court's assessment, the Supreme Court reversed the Court of Appeals. Id. at 887-88, 900, 110 S.Ct. 3177.
The Supreme Court explained that the purpose of Rule 56(e) is "not to replace conclusory allegations of the complaint with conclusory allegations of an affidavit." Id. at 888, 110 S.Ct. 3177. Additionally, the Court stated that it was improper for a court to infer missing facts in a summary judgment motion:
Id. at 889, 110 S.Ct. 3177.
The Court concluded that summary judgment was proper because whether Plaintiff suffered any harms "is assuredly not satisfied by averments which state only that one of respondent's members uses unspecified portions of an immense tract of territory." Id at 889, 110 S.Ct. 3177.
Analogous to Lujan, Express' complaint made a general allegation of injury, Fetish contested by pointing to an absence of facts to support an injury, and Express responded with affidavits once again containing a general allegation of injury. Just as the affidavits in Lujan were deemed flawed because they referenced the use of "unspecified portions" of a vast area of land, Express' allegations are flawed because they refer to unspecified damages based on hypothetical courses of action. Express' declarations fail to provide any specifics about the hypothetical courses of actions, such as the feasibility, cost, timing, and distribution issues involved in altering the embroidery on the Long Camisole. Express' declarations fail to declare with any specificfty the extent to which such hypothetical actions could have mitigated Express' loss. Express' declarations even fail to specify a simple range in which Express estimates its damages may have fallen.
As instructed by Lujan, this Court cannot presume missing facts which would
iv. Colucci's Declaration Lacks a Foundation to Establish Personal Knowledge of the Damages
Rule 56(e) requires that affidavits "shall be made on personal knowledge." Colucci's statements about the hypothetical courses of action Express might have taken lack an adequate foundation to demonstrate that the facts stated are within Colucci's personal knowledge.
As noted above, the thrust of Colucci's statements in ¶ 42 is the following three propositions: (1) if Fetish had not made a fraudulent misrepresentation, Colucci might have recommended several different courses of action; (2) Express could have mitigated its lost profits from the Long Camisoles by taking one of Colucci's courses of action; (3) therefore Express suffered damages.
The Court recognizes that Colucci established a sufficient foundation of personal knowledge to support the first proposition. However, in order to find that Colucci's statements are evidence of damages, the Court would also have to accept the second proposition. Besides being speculative, nothing in the declaration suggests that Colucci has personal knowledge that his recommendations would have helped Express mitigate its lost profits. For example, there is nothing in the declaration to suggest that Colucci has personal knowledge of the feasibility or cost of changing the manufacturing process to alter the embroidery. As far as the Court can discern, the foundation for the statements in ¶ 42 is the following two statements:
It is well settled that such statements alone are not sufficient to establish personal knowledge and competency. Bank Melli Iran v. Pahlavi,
Where the declarant lacks personal knowledge of the facts stated, the declarations are entitled to no weight. Nat'l Steel Corp., 121 F.3d at 502 (affirming district court's exclusion of evidence due to a lack of personal knowledge in a summary judgment proceeding); Bank Melli Iran, 58 F.3d at 1412 (declarations by counsel in a summary judgment proceeding were entitled to no weight where counsel lacked personal knowledge). Because Express' only evidence on the issue Is a declaration that lacks an adequate foundation and is not based on the personal knowledge of the declarant, no triable issue of material fact has been raised. Taylor v. List
Based on the foregoing reasons, the Court does not find Colucci's statements in ¶ 42 or Stevens' declarations to show evidence of damages. In the absence of any other evidence of damages,
2. Damages for the Investigation Costs
Express also argues that it suffered damages when it incurred the expense of sending its attorneys to the Far East to document the public domain nature of the lace trim.
Under California Civil Code § 1709, "[o]ne who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers." California Civil Code § 3333, the general tort damages measure, further specifies that for wrongs not arising from a breach of contract, the measure of damages is "the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not."
Express cites to Pohl v. Mills, 218 Cal. 641, 650, 24 P.2d 476 (1933) for the proposition that one who incurs more expense because another falsely states that a work is protected by copyright suffers pecuniary damages. Express argues that it should similarly be compensated for its investigative expenses incurred as a result of Fetish's misrepresentation that the lace trim was protected by a copyright.
In Pohl, the plaintiff paid money to defendant in order to operate a noveltyshaped roadside beverage stand because the defendant had fraudulently represented that he had a copyright on the beverage stand. Id. at 651-52, 24 P.2d 476. Thus, the plaintiffs damages were essentially an increased business expense. In contrast, Express' alleged damages stem from the investigation of Fetish's copyright claims out of a concern of potential or anticipated litigation. The specific costs are derived from paying Express' attorneys to investigate the claims. Therefore, Express' expenses are more properly characterized as attorney's fees rather than the business expenses awarded in Pohl. See e.g. Trope v. Katz,
The general rule is that each party to a lawsuit is generally responsible for its own attorney's fees "except as attorney's
Moreover, it would be inappropriate to interpret Pohl to carve out an exception to this general rule and permit a plaintiff to recover attorney's fees in this copyright context. The California Supreme Court has stated that it has "moved cautiously in expanding the non-statutory bases on which awards of attorney's fees may be predicated" and want to avoid opening a "Pandora's Box of prolonged litigation." Gray, 35 Cal.3d at 507,
Overall, this Court finds that no genuine issue of material fact exists concerning the element of damages because there is no evidence of damages based on lost profits or investigation expenses. Because Express failed to show that a genuine issue of material fact exists concerning damages, and Express bears the burden of proof on the element of damages at trial, Fetish is entitled to judgment as a matter of law. Lujan, 497 U.S. at 884, 110 S.Ct. 3177. Therefore, the Court GRANTS Fetish's motion for summary judgment with respect to Count III.
C. Unfair & Unlawful Business Practice Claim: Count IV
In Count IV of its complaint, Express claimed that Fetish's misrepresentation was unlawful and unfair in violation of Cal. Bus. & Prof.Code § 17200, which prohibits any business act or practice that it "unlawful, unfair, or fraudulent." Damages or harm are an element of all three types of prohibited business practices. Because Express has failed to show that a triable issue of fact exists concerning damages or harm, see supra Part III.B., Express has also failed to establish an element of § 17200 and Fetish is entitled to judgment as a matter of law. Lujan, 497 U.S. at 884, 110 S.Ct. 3177.
1. Unlawful Conduct
Unlawful conduct is defined as "any practices forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made." Saunders v. Superior Court,
Express argues that Fetish's alleged misrepresentations concerning the scope of the copyright constitute unfair conduct in violation of § 17200. Unfair conduct is "any practice whose harm to the victim outweighs its benefits." Olsen v. Breeze, Inc.,
Express claims that Fetish "significantly harmed and threatened competition, and violated the spirit of the antitrust laws" when it made the alleged fraudulent misrepresentation concerning the scope of its copyright. (Pl.'s Opp. at 23.) Express also claims that Fetish used the alleged misrepresentation as "leverage to force Express to withdraw its product from the market." (Pl.'s Opp. at 23.)
For the reasons set forth supra Part III.B, Express has failed to point to any evidence suggesting that it suffered any harm.
On summary judgment the moving party is entitled to a judgment as a matter of law where "the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Lujan, 497 U.S. at 884, 110 S.Ct. 3177.. In the absence of a showing of any harm or damages, the Court obviously cannot weigh whether the alleged harm outweighed its alleged benefits. Therefore, Fetish is entitled to judgment as a matter of law.
3. Fraudulent Conduct
"Fraudulent" as used in § 17200 "does not refer to the common law tort of fraud but only requires a showing members of the public are likely to be deceived." Olsen, 48 Cal.App.4th at 617-618, 55 Cal.Rptr.2d 818 (citing Bank of the West v. Superior Court,
Express does not point to any evidence suggesting that the representations concerning the copyright were disseminated to the public, let alone likely to deceive the public. Therefore, Express has failed to raise a triable issue of material fact for a cause of action under § 17200 based on "fraudulent conduct."
Overall, Express has failed to show that a genuine issue of material fact exists concerning at least one element of the cause of action under § 17200, and because Express bears the burden of proof at trial, Fetish is entitled to judgment as a matter, of law. Lujan, 497 U.S. at 884, 110 S.Ct. 3177. Therefore, the Court GRANTS Fetish's motion for summary judgment with respect to Count IV.
For the foregoing reasons, the Court GRANTS Fetish's motion for summary judgment on Counts III and IV.
IT IS SO ORDERED.
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