United States District Court, Northern District of California
March 21, 2001
GARY FONG, INC., PLAINTIFF,
TERESA C. HALTON AND PETER HALTON, DEFENDANTS.
The opinion of the court was delivered by: Jenkins, District Judge.
ORDER GRANTING SUMMARY
Before the Court is defendants Teresa Halton and Peter Halton's
("Defendants") Motion to Dismiss the Complaint or, in the Alternative
Motion for Summary Judgment. This motion requires the Court to consider
whether plaintiff Gary Fong, Inc.'s ("Plaintiff") Complaint is barred by
the doctrine of res judicata. The Court hereby GRANTS Defendants' motion
for summary judgment because Plaintiff should have raised the current
causes of action for false designation of origin and common law trademark
infringement with respect to the domain name "storybook.com" in a
previously litigated action.
Plaintiff filed its Second Amended Complaint ("SAC") in a prior
action, Gary Fong, Inc. v. Teresa C. Halton and Peter C. Halton, CV
98-9034 ABC and CV 98-7769 ABC, on March 28, 2000 in the Central District
of California. The SAC asserted the following claims against Defendant
1) a claim seeking the cancellation of a trademark
2) a claim for violation of the Lanham Act,
15 U.S.C. § 1125 (a);
3) a claim alleging a breach of fiduciary duty;
4) a claim for breach of an oral agreement; and
5) a claim for copyright infringement.
Plaintiff also asserted the Lanham Act claim against Defendant Peter
Halton. This previous suit dealt with both Defendants' alleged
infringement of Plaintiff's service mark, "Storybook Studio." The parties
submitted a joint pretrial order on June 29, 2000. The court signed the
Pretrial Order on July 10, 2000. The Pretrial Order asserted the same
claims as the SAC.
The matter was tried before a jury from July 19 through July 26, 2000.
The jury returned a special verdict on July 26, 2000 in favor of
Plaintiff. Plaintiff was awarded $105,446.16 in compensatory damages from
Defendants, jointly and severally, for infringement of the service mark
Studio." Plaintiff was also awarded $64,518.48 in compensatory damages
from Defendant Teresa Halton for fraudulent procurement of service mark
registration and breach of oral agreement with respect to the service
mark "Storybook Studio."
On August 10, 2000 the court asked for briefing on Defendants'
objections to Plaintiff's injunctive and declaratory relief requests.
Both parties filed briefs on this issue. The relevant motion for
resolution was Plaintiff's motion to amend the Pretrial Order to clarify
Plaintiff was seeking to hold Defendants liable for infringing not only
the "Storybook Studio" service mark, but also the "Storybook" service
mark. Plaintiff argued the claim regarding the "Storybook" service mark
was disclosed in the Pretrial Order by its breach of fiduciary duty
claim. Specifically, Plaintiff asserted Defendants were on notice of a
service mark claim regarding "Storybook" because the fiduciary duty claim
relied on Defendants' registration of the "storybook.com" website.
The court disagreed stating,
[e]ven viewed in the most liberal sense possible, the
statement that "Defendants' registration of the domain
name storybook.com" violated T. Halton's fiduciary
duty to Plaintiff fails to encompass the legal theory
that Defendants infringed on Plaintiff's service mark
in violation of federal law. Furthermore, the PTO
[Pretrial Order] expressly asserts a claim for service
mark infringement that did not list "Storybook" as a
service mark. Thus, the PTO [Pretrial Order] does not
assert a service mark claim based on the use of
Def.'s Ex. L at 26 (emphasis added). The court went on to state, "the
Court finds that the issue of the `Storybook' service mark was not
presented at trial." Id. at 27 (emphasis added).
In the ease pending before this Court, Plaintiff's causes of action are
for false designation of origin and common law trademark infringement
with respect to "storybook.com."
If a motion to dismiss pursuant to Federal Rule of Civil Procedure 12
(b)(6) presents matters outside the pleadings, and such evidence is
considered by the court, "the motion shall be treated as one for summary
judgment and disposed of as provided in Rule 56, and all parties shall be
given reasonable opportunity to present all material made pertinent to
such motion by Rule 56." Fed.R.Civ.P. 12(b). Since the material facts
regarding the prior action in the Central District are not disputed by
the parties, including those facts that are beyond the face of the
pleadings in this case, the Court finds it appropriate to consider the
facts offered and rule on the appropriateness of summary judgment. Under
Federal Rule of Civil Procedure 56, summary judgment is proper if the
record 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. A
dispute about a material fact is genuine "if the evidence is such that a
reasonable jury could return a verdict for the non-moving party."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91
L.Ed.2d 202 (1986). If the nonmoving party fails to make a showing
sufficient to establish the existence of an element essential to that
party's case, and on which that party will bear the burden of proof at
trial, "the moving party is entitled to a judgment as a matter of law."
Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d
Defendants argue that this case cannot be maintained because it is
barred on grounds of res judicata. Under the doctrine of res judicata, a
on the merits bars further claims by parties or their privities based on
the same cause of action. See Brown v. Felsen, 442 U.S. 127, 99 S.Ct.
2205, 60 L.Ed.2d 767 (1979). A person may be precluded from pursuing a
claim if a prior party so closely represented his legal interests as to
be his virtual representative. See Nordhorn v. Ladish Co., Inc.,
9 F.3d 1402 (9th Cir. 1993); Bechtel Petro., Inc. v. Webster,
636 F. Supp. 486, 498 (N.D.Cal.1984). Specifically, a federal action may
be barred by the doctrine of res judicata where an earlier lawsuit: (1)
involved the same claim as the present suit; (2) reached a final judgment
on the merits; and (3) involved the same parties or their privies. See
Blonder-Tongue Laboratories v. Univ. of Ill. Found., 402 U.S. 313,
323-324, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971). "[R]es judicata bars not
only all claims that were actually litigated, but also all claims that
`could have been asserted' in the prior action." Int'l Union of Operating
Engineers-Employers Constr. Indus. Pension. Welfare and Training Trust
Funds v. Karr, 994 F.2d 1426, 1430 (9th Cir. 1993) (citing McClain v.
Apodaca, 793 F.2d 1031, 1033 (9th Cir. 1986)). Likewise, "[r]es judicata
bars all grounds for recovery that could have been asserted, whether they
were or not, in a prior suit between the same parties on the same cause
of action." Clark v. Bear Stearns & Co., 966 F.2d 1318, 1320 (9th Cir.
1992) (emphasis added). "One major function of claim preclusion is to
force a plaintiff to explore all the facts, develop all the theories, and
demand all the remedies in the first suit." 18 Charles Alan Wright,
Arthur R. Miller, and Edward H. Cooper, Federal Practice and Procedure,
§ 4408 (2000).
The Ninth Circuit considers four factors in determining whether
successive claims constitute the same cause of action:
(1) whether rights or interests established in the
prior judgment would be destroyed or impaired by
prosecution of the second action; (2) whether
substantially the same evidence is presented in the
two actions; (3) whether the two suits involve
infringement of the same right; (4) whether the two
suits arise out of the same transactional nucleus of
Int'l Union of Operating Engineers-Employers, 994 F.2d at 1429 (citing
Costantini v. Trans World Airlines, 681 F.2d 1199
, 1201-02 (9th Cir.
1982)). These factors, however, are "tools of analysis, not
requirements." Id. at 1430 (citing Derish v. San Mateo-Burlingame Bd. of
Realtors, 724 F.2d 1347
, 1349 (9th Cir. 1983)). For example, the Ninth
Circuit has previously applied the doctrine of res judicata solely on the
ground that the two claims arose out of the same transaction, without
reaching the other factors. See id. at 1430 (citing C.D. Anderson & Co.
v. Lemos, 832 F.2d 1097
, 1100 (9th Cir. 1987)). Determining whether two
events are part of the same transaction is essentially dependent on
whether the events are related to the same set of facts and whether the
events could conveniently be tried together. See id. at 1429 (citing
Western Sys., Inc. v. Ulloa, 958 F.2d 864
, 871 (9th Cir. 1992)).
The Defendants set forth the above-mentioned factors to demonstrate
that Plaintiff's claim is identical to the previous one. Defendants argue
Plaintiff's current claim arises out of the same nucleus of facts as the
previous claim and is therefore barred. Defendants maintain that Plaintiff
had a full and fair opportunity to assert superior rights to use
"storybook.com" in the previous action. Further, Defendants point out
that the Central District Court found Plaintiff was not entitled to
relief regarding infringement of "Storybook" or "storybook.com" because
Plaintiff failed to include that claim in the Pretrial Conference Order.
Therefore, according to Defendants, the claims in this case arise from
the same nucleus of facts at issue in the prior action, and could have
been litigated in the earlier case.
Defendants mention two additional factors to support their position:
(1) the parties will present substantially the same evidence and (2) the
two suits involve infringement of the same right. Defendants explain that
Plaintiff will need to produce the same evidence, mainly that Plaintiff
has a valid mark of "Storybook," that Defendants used the mark in
commerce, that Defendant's use was likely to cause confusion, and that
Plaintiff was damaged. Defendants also argue the heart of Plaintiff's new
infringement claim is the same as its prior claim: that Plaintiff has
superior rights to use as a service mark "Storybook," whether alone or in
conjunction with other words.
In opposition, Plaintiff contends the current infringement claim is
different and it could not have been brought it in the prior action.
However, Plaintiff offers no compelling explanation of why it could not
have brought this claim in the prior suit. Plaintiff simply explains
Defendant has since changed "storybook.com" from a photography promotion
website into a link to Defendants' new personal website. According to
Plaintiff, this somehow prevented Plaintiff from bringing a cause of
action with respect to "Storybook" and "storybook.com" in the prior cause
The Court finds Plaintiff's claims are sufficiently similar to
constitute the same cause of action for res judicata purposes. First, the
claims arise under the same nucleus of facts. Second, substantially the
same evidence would be presented in the new action. Third, the two suits
involve infringement of basically the same right. Finally, there is no
compelling reason why Plaintiff could not have brought a "Story book" or
"storybook.com" claim in the prior action. Since Plaintiff failed to
properly place the issue before the jury in the Central District case, it
is now barred as res judicata.*fn1
The doctrine of claim preclusion is intended to force a plaintiff to
explore all the facts, develop all the theories, and demand all the
remedies in the initial suit. Plaintiff failed to properly place the
issue before the jury in the prior Central District action despite ample
opportunity to do so. Therefore, the Court GRANTS Defendants' Motion to
Dismiss because Plaintiff's claim is barred as res judicata. Plaintiff s
claim with respect to "Storybook" and "storybook.com" should have been
raised in its first suit.
IT IS SO ORDERED.