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J2 Global Communications, Inc. v. Protus IP Solutions

March 31, 2009

J2 GLOBAL COMMUNICATIONS, INC., PLAINTIFF,
v.
PROTUS IP SOLUTIONS; JOSEPH NOUR; SIMON NEHME; AND THOMAS J. MARTIN, DEFENDANTS.



The opinion of the court was delivered by: Dean D. Pregerson United States District Judge

ORDER DENYING MOTION TO BIFURCATE

[Motion filed on March 6, 2009]

Plaintiff and Counterclaim Defendant j2 Global Communications, Inc. ("j2") and Defendant and Counterclaim Plaintiff Protus IP Solutions ("Protus") are competitors who both provide electronic faxing services. j2's Complaint alleges that Protus violated the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227 & 47 C.F.R. § 68.318, committed trespass to chattels, and engaged in unfair business practices in violation of California Business & Professions Code § 17200. In its Counterclaim, Protus alleges that j2 violated the TCPA, committed trespass to chattels, and engaged in unfair business practices. Protus also alleges that j2 violated the Lanham Act, 15 U.S.C. § 1125(a), committed trade libel and defamation, and tortiously interfered with Protus's prospective economic advantage. Before the Court is j2's Motion to Bifurcate Defamation Counterclaims for Trial and Stay All Related Discovery. Protus opposes this motion. After reviewing the materials submitted by the parties and hearing oral argument, the Court denies the Motion to Bifurcate and Stay.

I. BACKGROUND

j2 and Protus are competitors in two aspects of electronic faxing. Both parties offer a service in which they provide a fax number to customers. When a fax is sent to that number, the company converts the fax to an imaged document that is forwarded to the customer as an email attachment. Counterclaim, ¶¶ 4, 8-9; Answer to Counterclaim, ¶¶ 8-9. Additionally, both parties offer a service to customers sending "broadcast" or "blast" faxes to multiple fax numbers. Under certain circumstances, a company's or individual's participation in unsolicited faxing may violate federal law, the TCPA. j2 filed this case on January 20, 2006. j2 alleges that Protus has been knowingly and integrally involved in sending a high volume of junk faxes to j2's customers and over j2's fax lines without either the customers' or j2's consent. Compl. ¶¶ 11, 13, 15. j2 seeks relief on the basis of four causes of action: (1) violation of the TCPA, 47 U.S.C. § 227; (2) violation of the TCPA, 47 C.F.R. § 68.318(d); (3) trespass to chattels; and (4) unfair business practice, California Business & Professions Code § 17200 et seq.

With leave from the Court,*fn1 Protus filed a Counterclaim on September 12, 2007. The first four causes of action contained in Protus's Counterclaim are similar to j2's claims against Protus.

In particular, Protus alleges that j2 was involved its clients' mass, unsolicited faxing to Protus customers. Countercl., ¶¶ 8-21. Protus alleges that j2 (1) violated the TCPA, 47 U.S.C. § 227; (2) violated the TCPA, 47 C.F.R. § 68.318(d); (3) committed trespass to chattels; and (4) engaged in unfair business practices, Cal. Bus. & Prof. Code § 17200.*fn2

Protus's Counterclaim also alleges four additional causes of action. The fifth through eighth counterclaims center on Protus's allegation that j2 has made false and misleading statements regarding Protus, Protus's products or services, and j2's products and services, and that those statements have harmed Protus. Countercl., ¶ 24. According to the Counterclaim, the allegedly defamatory and/or misleading statements generally fall into the following categories: (1) that j2 is a leader in the fight against unsolicited advertising, including junk faxing, and has instituted litigation against junk faxers, (2) that Protus is one of the largest senders of junk faxes in the United States, and (3) that while Protus would send junk faxes to its customers, j2 would not. Protus alleges that these statements occurred through press releases and statements by Protus representatives in online support. Id., ¶¶ 25, 49. In the Fifth Claim for Relief, Protus alleges that j2 engaged in false advertising as proscribed by the Lanham Act, 15 U.S.C. § 1125(a). In the Sixth and Seventh Claims for Relief, Protus alleges that j2's statements constituted trade libel and defamation, respectively. In the Eighth Claim for Relief, Protus alleges that j2 tortiously interfered with Protus's prospective economic advantage through its statements. j2 filed its Answer to the Counterclaim on October 9, 2007. See Docket Entry No. 174. In connection with both the Complaint and the Counterclaim, the parties have heavily litigated discovery issues in front of Magistrate Judge Wistrich. j2 filed this Motion on March 6, 2009. Through it, j2 seeks to bifurcate the Fifth through Eighth Claims for Relief in Protus's Counterclaim from a trial on the junk fax claims. j2 argues that bifurcation would be beneficial because (1) a trial on the junk fax claims may resolve Protus's statement-related causes of action; (2) bifurcation would simplify the issues in an already complex case; and (3) bifurcation may save the parties money on discovery. Protus opposes the motion. Protus argues that efficiency benefits would be limited to nonexistent, that it will be prejudiced, and that j2 is engaged in improper tactics.*fn3

II. DISCUSSION

j2 moves to bifurcate Protus's fifth through eighth claims for relief, the claims centered on j2's statements about Protus's and its own tactics and products. While the Court does not consider j2's motion to be meritless, the Court is not convinced that bifurcation of these issues would serve the expeditious administration of justice.

A. Legal Standard

Pursuant to Federal Rule of Civil Procedure 42(b), a district court has the power to bifurcate a single lawsuit and order a separate trial of particular issues or claims. Specifically, Rule 42(b) provides that "[f]or convenience, to avoid prejudice, or to expedite and economize, the court may order a separate trial of one or more separate issues, claims, crossclaims, counterclaims, or third-party claims." Fed. R. Civ. P. 42(b).

A district court has "broad discretion" -- limited principally by constitutional issues the parties do not raise here -- in deciding whether or not to bifurcate a case. Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1088 (9th Cir. 2002). Relevant considerations as a court exercises that discretion include convenience, potential prejudice that would result from trying the cases together or apart, judicial economy, the potential to reduce the risk of jury confusion, and the existence of separable issues. William A. Schwarzer et al., Federal Civil Procedure Before Trial § 16:160.4 (2008) (listing considerations); Bates v. United Parcel Service, 204 F.R.D. 440, 448 (N.D. Cal. 2001)(citing Schwarzer et al. and listing considerations); De Anda v. City of Long Beach, 7 F.3d 1418, 1421 (9th Cir. 1993) (holding that district court abused its discretion in bifurcating trial such that plaintiff was prevented from putting on case). Because bifurcation rests in principles of judicial economy, additional considerations include (1) whether evidence offered in the proposed phases will overlap, see Hangarter v. Provident Life & Acc. Ins. Co., 373 F.3d 998, 1021 (9th Cir. 2004), and (2) whether bifurcation will "permit deferral of costly and possibly unnecessary proceedings pending resolution of potentially dispositive preliminary issues," Jinro America, Inc. v. Secure Investments, Inc., 266 F.3d 993, 998 (9th Cir. 2001). The usual course is that all claims in a case -- even if founded on different causes of action -- are tried together, as such an approach is generally considered the most efficient for the court and the parties. 9A Charles Alan Wright & Arthur R. ...


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