Philo v. Liminova, Inc.
| Decision Date | 15 April 2013 |
| Docket Number | Civil No. 13cv113-AJB (WVG) |
| Parties | A. PAUL PHILO, Plaintiff, v. LIMINOVA, INC., WALTER LIM, and DOES 1 through 10, inclusive, Defendants. |
| Court | U.S. District Court — Southern District of California |
Defendants' filed a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) Plaintiff's first cause of action for fraudulent concealment and request for punitive damages. (Doc. No. 5.) The Plaintiff filed an opposition, (Doc. No. 10), and the Defendants filed a reply, (Doc. No. 11). For the reasons set forth below, the Defendant's motion to dismiss is GRANTED.
Defendant Walter Lim ("Defendant") is an officer, director, and shareholder in Head First, Inc. ("Head First"). (Doc. No. 1-1, ¶ 2.) Head First was owned by Defendant and Don Lewis. (Id.) After Don Lewis' death, Plaintiff A. Paul Philo ("Plaintiff") succeeded to Don Lewis' interest in Head First. (Id.)
Since at least 1971, Head First has been in the business of developing, promoting, and marketing "Top Coverage," a non-medicated head spray to cover bald spots and mask thinning hair. (Id. at ¶ 7.) The "Top Coverage" name and mark are registered with the United States Patent and Trademark Office ("USPTO") under Registration No. 1813335. (Id.) Head First has continuously and exclusively used the "Top Coverage" mark in commerce in connection with the advertising, promotion, and sale of its hair care products. (Doc. No. 1-1, ¶ 8.)
On or about January 2011, Defendant advised Plaintiff that Head First was going to discontinue manufacturing and marketing the "Top Coverage" brand of products due to environmental regulations concerning the use of propellants, and that Head First would need to be dissolved. (Id. at ¶ 9.) The Plaintiff wanted to purchase the "Top Coverage" trademark and name from Head First and attempt to find a new manufacturer and continue to develop and market the product in compliance with the environmental regulations. (Id. at ¶ 10.) Defendant Lim agreed and in February 2011, Head First assigned all interest and goodwill in the "Top Coverage" trademark to Plaintiff for valuable consideration. (Id.) The Assignment Agreement was signed by Defendant Lim as president of Head First, and duly recorded with the Patent and Trademark Office on or about April 8, 2011. (Id.)
Plaintiff alleges that while the parties were negotiating and entering into the Assignment Agreement for Top Coverage, Defendant Lim was already marketing the "Top Coverage" hair product through his company ("Liminova") under the name and mark "TC Plus." (Doc. No. 1-1, ¶ 11.) Like "Top Coverage," "TC Plus" was a head spray sold in spray cans to conceal bald spots and thinning hair. (Id.) The "TC Plus" label stated, "If you like . . . Top Coverage You will love TC PLUS," and featured before-and-after photos of a male scalp virtually identical to those used for "Top Coverage" labels. (Id.) Moreover, "TC Plus" was being advertised in various outlets as "Top Coverage TC Plus." (Id.)
On April 27, 2011, two months after the execution of the Assignment Agreement, Liminova filed a trademark application with the USPTO for registration of the mark "TC Plus," Serial No. 85306449, for goods defined as "Hair care preparation, namely, hair tinting spray featuring spray on, wash out hair tinting and thickening spray in a variety of hair colors." (Doc. No. 1-1, ¶ 12.) In February 2012, Plaintiff filed an opposition to Defendant's trademark application and Liminova subsequently abandoned the application. (Doc. No. 1-1, ¶ 13; Doc. No. 10, p.3:19-20.)
On December 10, 2012, Plaintiff filed the instant complaint in San Diego Superior Court. Defendants subsequently removed the case to this court and filed the instant motion to dismiss.
A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the pleadings and allows a court to dismiss a complaint upon a finding that the plaintiff has failed to state a claim upon which relief may be granted. See Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The court may dismiss a complaint as a matter of law for: (1) "lack of cognizable legal theory," or (2) "insufficient facts under a cognizable legal claim." SmileCare Dental Grp. v. Delta Dental Plan of Cal., 88 F.3d 780, 783 (9th Cir. 1996) (citation omitted). However, a complaint survives a motion to dismiss if it contains "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
Notwithstanding this deference, the reviewing court need not accept "legal conclusions" as true. Ashcroft v. Iqbal, -- U.S. -- , 129 S. Ct. 1937, 1949-50, 173 L.Ed.2d 868 (2009). It is also improper for the court to assume "the [plaintiff] can prove facts that [he or she] has not alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). On the other hand, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal, 129 S.Ct. at 1950. The court only reviews the contents of the complaint, accepting all factual allegations astrue, and drawing all reasonable inferences in favor of the nonmoving party. al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009) (citations omitted).
Defendants' move to dismiss Plaintiff's first cause of action for fraudulent concealment and Plaintiff's punitive damages claims pursuant to Rule 12(b)(6). Defendants challenge the sufficiency of Plaintiff's first cause of action, for fraudulent concealment, on the grounds that Plaintiff fails to allege that any statutory, common law, or contractual duty exists requiring the disclosure of facts alleged to have been concealed by Defendants. (Doc. No. 5-1, p.3.) Defendants also contend that the Plaintiff fails to sufficiently plead an act of malice, fraud, or oppression on behalf of Defendants to support his claim for punitive damages under the first cause of action as required by California Civil Code § 3294 and Rule 8. (Id.)
In California, a claim for fraudulent concealment consists of five elements: "(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage." Kaldenbach v. Mutual of Omaha Life Ins. Co., 178 Cal.App.4th 830, 850, 100 Cal.Rptr.3d 637 (Ct.App.2009) (citations and internal quotation marks omitted). "Fraud or deceit may consist of the suppression of a fact by one who is bound to disclose it or who gives information of other facts which are likely to mislead for want of communication of that fact." Outboard Marine Corp. v. Superior Court, 52 Cal.App.3d 30, 37, 124 Cal.Rptr. 852 (1975).
A cause of action for fraudulent concealment requires an allegation that the defendant owed a duty to disclose the concealed fact. Levine v. Blue Shield of California, 189 Cal. App. 4th 1117, 1126-1127 (2010). Where material facts are known to one partyand not to the other, failure to disclose them is not actionable fraud unless there is some relationship between the parties which gives rise to a duty to disclose. A duty to disclose arises between two parties where a fiduciary or confidential relationship exists between them,1 or if there are other special circumstances which require disclosure.2 See Heliotis v. Schuman, 181 Cal. App. 3d 646, 651, 226 Cal. Rptr. 509 (1986). The special circumstances in which a duty to disclose may arise such that nondisclosure or concealment constitute actionable fraud are: (1) when a fiduciary relationship exists between the parties; (2) when the defendant has exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes a partial representation to the plaintiff while suppressing other material facts. See LiMandri v. Judkins, 52 Cal.App.4th 326, 336, 60 Cal.Rptr.2d 539 (Ct.App.1997). "The first circumstance requires a fiduciary relationship; each of the other three 'presupposes the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise.'" Deteresa v. ABC, 121 F.3d 460, 467 (9th Cir.1997) (quoting LiMandri, 52 Cal.App.4th at 336-37, 60 Cal.Rptr.2d 539);. See LiMandri, 52 Cal.App.4th at 337, 60 Cal.Rptr.2d 539 ().
Upon review of the complaint, the Court finds the Plaintiff has failed to sufficiently plead that Defendants owed him a fiduciary duty. The allegation of a fiduciary relationship must be supported by either a contract, or a relationship that imposes it as a matter oflaw."3 The Plaintiff's complaint, however, fails to set forth any facts supporting the existence of a legally recognized fiduciary relationship. Plaintiff's complaint states that: (1) Defendant Walter Lim is an officer, director and shareholder in Head First, Inc., which was first owned by Defendant and Don Lewis; and (2) "when Don Lewis passed away, Plaintiff succeeded to Don Lewis' interest in Head First." (Doc. No. 1-1, ¶ 2.) The Plaintiff argues that as a director of Head First, Inc., Defendant Lim owed the Plaintiff a fiduciary duty as a shareholder. Plaintiff's argument fails, however, because the Plaintiff's complaint does not allege that he was a shareholder in Head First, Inc., it alleges only that he...
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