San Diego Cnty. Credit Union v. Citizens Equity First Credit Union, Case No.: 18cv967-GPC(RBB)

Citation344 F.Supp.3d 1147
Decision Date02 October 2018
Docket NumberCase No.: 18cv967-GPC(RBB)
Parties SAN DIEGO COUNTY CREDIT UNION, Plaintiff, v. CITIZENS EQUITY FIRST CREDIT UNION, Defendant.
CourtU.S. District Court — Southern District of California

Jesse A. Salen, Lisa M. Martens, Martin Bader, Stephen S. Korniczky, Sheppard Mullin Richter & Hampton LLP, San Diego, CA, for Plaintiff.

Emma Leigh Baratta, Pro Hac Vice, James Wilson Dabney, Pro Hac Vice, Hughes Hubbard & Reed LLP, New York, NY, Steven J. Cologne, Higgs Fletcher and Mack, San Diego, CA, for Defendant.

ORDER DENYING DEFENDANT'S MOTION TO DIMISS FOR LACK OF SUBJECT MATTER JURISDICTION AND GRANTING DEFENDANT'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM WITH LEAVE TO AMEND

Hon. Gonzalo P. Curiel, United States District Judge

Before the Court is Defendant's motion to dismiss for lack subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) and failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 40.) Plaintiff filed an opposition on August 31, 2018. (Dkt. No. 42.) Defendant filed a reply on September 14, 2018. (Dkt. No. 45.) Pursuant to Civil Local Rule 7.1(d)(1), the Court finds the matter suitable for adjudication without oral argument. Based on the reasoning below, the Court DENIES Defendant's motion to dismiss for lack of subject matter jurisdiction and GRANTS Defendant's motion to dismiss for failure to state a claim with leave to amend.

Background

On May 16, 2018, Plaintiff San Diego County Credit Union ("SDCCU") filed a complaint against Defendant Citizens Equity First Credit Union ("CEFCU") for declaratory judgment of non-infringement and invalidity of trademarks and related claims. (Dkt. No. 1, Compl.) SDCCU owns over 40 federally registered trademarks in connection with its credit union services, including U.S. Trademark Registration No. 4,560,596 for "IT'S NOT BIG BANK BANKING. IT'S BETTER" (the "SDCCU Mark") which issued on July 1, 2014. (Dkt. No. 1, Compl. ¶ 25; Dkt. No. 1-2, Compl., Ex. A.) CEFCU owns U.S. Trademark Registration No. 3,952,993 for "CEFCU. NOT A BANK. BETTER" (the "CEFCU Mark") which issued on May 3, 2011. (Dkt. No. 1, Compl. ¶ 33; Dkt. No. 1-3, Compl., Ex. B.) Prior to filing the trademark application for the CEFCU Mark, CEFCU conducted a trademark search report and, on information and belief, learned that several third-party credit unions already used trademarks similar to the CEFCU Mark such as "NOT A BANK – BETTER!", "BETTER THAN A BANK", and "IT'S NOT A BANK" ("Third Party Marks"). (Dkt. No. 1, Compl. ¶¶ 3, 34.)

SDCCU and CEFCU are both large credit unions. (Id. ¶ 2.) SDCCU's customers are primarily located in Southern California while CEFCU's customers are primarily located in Peoria, Illinois and northern California. (Id. ) At the end of 2008, CEFCU purchased Valley Credit Union in Northern California but did not direct its marketing bearing the CEFCU Mark or CEFCU's Common Law Mark in connection with credit union services outside the Illinois market until June 2011. (Id. ¶ 31.) In June 2011, CEFCU started using the CEFCU Mark in connection with marketing campaigns in the Illinois and California markets. (Id. ¶ 32.)

In early 2016, a CEFCU employee saw a billboard in San Diego, CA containing the SDCCU Mark used to market credit union services and notified CEFCU managers in March 2016. (Id. ¶ 38.) On May 17, 2017, CEFCU filed a petition for cancellation1 of the '596 Trademark Registration No. for the SDCCU Mark with the U.S. Patent and Trademark Office's ("USPTO") Trademark Trial and Appeal Board ("TTAB") claiming the SDCCU Mark is likely to cause confusion or to cause mistake or to deceive consumers when viewing CEFCU's Mark. (Id. ¶¶ 5, 39; Dkt. No. 1-5, Compl., Ex. D.) On July 3, 2017, SDCCU filed an Answer and Counterclaim in the cancellation proceeding. (Dkt. No. 29-3, Dabney Decl., Ex. 3.) On August 7, 2017, CEFCU filed an Answer to the Counterclaim. (Id., Ex. 4.) On August 28, 2017, SDCCU filed an Amended Counterclaim to which CEFCU timely answered on September 11, 2017. (Id., Exs. 5. 6.) A scheduling order was issued and discovery has taken place. (Id., Ex. 7.) On March 23, 2018, CEFCU filed a motion for leave to amend its petition to add an additional ground for cancellation. (Id., Ex. 17.) Then on May 16, 2018, SDCCU filed this action and moved the PTO for a stay of the cancellation proceedings which the PTO granted on June 8, 2018. (Id., Exs. 1, 23, 24.)

In this action, the complaint alleges that the CEFCU Mark is, in fact, more similar to each of the Third Party Marks than it is to the SDCCU Mark. (Dkt. No. 1, Compl. ¶ 7.) Therefore, if CEFCU believes that the scope of protection for its mark is broad enough to encompass the SDCCU Mark, CEFCU materially misrepresented to the USPTO that the CEFCU Mark was not confusingly similar to any of the Third-Party Marks. (Id. ) On the other hand, if CEFCU believes that its mark was not confusingly similar to any of the Third-Party marks, the CEFCU Mark cannot be broad enough to encompass the SDCCU Mark. (Id. ) In either case, CEFCU's cancellation action and threat of lawsuit are objectively baseless and brought with the subjective intent to harm SDCCU. (Id. ) SDCCU asserts it has a reasonable apprehension that CEFCU will file a lawsuit against it alleging trademark infringement. (Id. ¶ 47.)

The complaint alleges eight causes of action seeking 1) declaratory judgment of non-infringement of CEFCU. NOT A BANK. BETTER.; 2) declaratory judgment of non-infringement of NOT A BANK. BETTER.; 3) declaratory judgment for invalidity of CEFCU. NOT A BANK. BETTER.; 4) declaratory judgment for invalidity of NOT A BANK. BETTER.; 5) false or fraudulent trademark registration under 15 U.S.C. § 1120 ; 6) unfair competition under 15 U.S.C. § 1125 ; 7) unfair competition under California Business & Professions Code section 17200 et seq. ; and 8) unfair competition under common law. (Id. ¶¶ 58-109.)

On July 31, 2018, the Court denied Defendant's motion for lack of personal jurisdiction. (Dkt. No. 39.) On August 13, 2018, Defendant filed the instant motion to dismiss for lack of subject matter jurisdiction the first four causes of action arguing Plaintiff has not asserted a justiciable claim for alleged infringement under the Declaratory Judgment Act. (Dkt. No. 40.) Defendant additionally moves to dismiss the remaining causes of action for failure to state a claim. In response, Plaintiff does not oppose Defendant's motion to dismiss the seventh and eighth causes of action and agrees to voluntarily dismiss them. (Dkt. No 42 at 312 .) Accordingly, the Court GRANTS Defendant's motion to dismiss the seventh cause of action for unfair competition under California Business & Professions Code section 17200 and eighth cause of action under California common law as unopposed.

Discussion
I. Legal Standard as to Federal Rule of Civil Procedure 12(b)(1)

Federal Rule of Civil Procedure ("Rule") 12(b)(1) provides for dismissal of a complaint for lack of subject-matter jurisdiction. Fed. R. Civ. P. 12(b)(1). Rule 12(b)(1) jurisdictional attacks can be either facial or factual. White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). Here, Defendant is mounting a factual attack on subject matter jurisdiction by providing evidence outside the complaint.

In a factual attack, the challenger provides evidence that an alleged fact in the complaint is false, thereby resulting in a lack of subject matter jurisdiction. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). Under a factual attack, the allegations in the complaint are not presumed to be true, White, 227 F.3d at 1242, and "the district court is not restricted to the face of the pleadings, but may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction." McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988). "Once the moving party has converted the motion to dismiss into a factual motion by presenting affidavits or other evidence properly brought before the court, the party opposing the motion must furnish affidavits or other evidence necessary to satisfy its burden of establishing subject matter jurisdiction." Savage v. Glendale Union H.S., Dist. No. 205, Maricopa Cnty., 343 F.3d 1036, 1039 n. 2 (9th Cir. 2003). The district court may review evidence beyond the complaint without converting the motion to dismiss into a motion for summary judgment. See id. However, "[a] court may not resolve genuinely disputed facts where ‘the question of jurisdiction is dependent on the resolution of factual issues going to the merits.’ " Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987) (citations omitted) ). Ultimately, Plaintiff has the burden to demonstrate that subject matter jurisdiction exists. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994).

The Declaratory Judgment Act ("DJA"), provides "[i]n a case of actual controversy within its jurisdiction ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). The phrase "case of actual controversy" under the DJA refers to Article III's "Cases" and "Controversies" for justiciable claims. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 119, 126-27, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007) (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240, 57 S.Ct. 461, 81 L.Ed. 617 (1937) ); American States Ins. Co. v. Kearns, 15 F.3d 142, 143 (9th Cir. 1994) (an actual controversy under the DJA is identical to Article III's constitutional case or controversy requirement). To constitute a case or controversy, "the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal...

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