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Novelty Textile, Inc., A California Corporation v. Windsor Fashions

March 20, 2013

NOVELTY TEXTILE, INC., A CALIFORNIA CORPORATION, PLAINTIFF,
v.
WINDSOR FASHIONS, INC., A CALIFORNIA CORPORATION; XTAREN, INC., A CALIFORNIA CORPORATION, DEFENDANTS.



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

ORDER DENYING MOTION TO DISQUALIFY PLAINTIFF'S COUNSEL [Dkt. No. 18]

Presently before the court is Defendant Xtaren, Inc. ("Xtaren")'s Motion to Disqualify Plaintiff's Counsel.

I. BACKGROUND

Plaintiff Novelty Textile, Inc. is "engaged in the apparel industry as a textile converter of imported and domestic fabrications." (Compl. ¶ 1.) Plaintiff creates and purchases exclusive rights to "unique two-dimensional graphic artworks" that are primarily used on textiles and garments sold within the fashion industry. (Id.) Plaintiff alleges that Xtaren and Windsor Fashions, Inc. ("Windsor") (collectively "Defendants") sold, manufactured and/or distributed fabric and/or garments featuring a design identical or substantially similar to a design to which Plaintiff owns a registered copyright. (Id. at 4.)

Xtaren is a paying member of the Korean American Manufacturers Association ("KAMA").*fn1 (Chong Decl. ¶ 12, Exh. D.) On or about April 11, 2012, the Law Offices of Jeong sent a cease-and-desist letter*fn2 to Windsor on behalf of Plaintiff alleging copyright infringement for an apparel product Windsor once sold. (Kim Decl. ¶ 8.)

Windsor's counsel, Manning & Kass, sent a letter to Xtaren demanding indemnification according to the terms of their purchase agreement. (Id. ¶ 5.) Attached to the indemnification letter was the cease-and-desist letter sent to Windsor by Jeong's office. (Id. ¶ 8.)

Dean Kim ("Kim") is Xtaren's general management assistant. (Id. ¶ 2.) Kim states that after receiving the letter from Windsor, he called several of the KAMA attorneys to discuss it. (Id. ¶ 7.) Kim made an appointment with Jeong, who was one of the KAMA attorneys, and prior to the meeting realized that Jeong's office had sent the cease-and-desist letter to Windsor. (Id. ¶ 8.)

At that point, Kim consulted KAMA and Xtaren management and decided to go ahead with the meeting with Jeong, "since Jeon was KAMA's General Counsel and the consultation was free." (Id. ¶ 10.)

Kim asserts that he met with Jeong and told him he was from Xtaren, but did not show him the cease-and-desist letter. (Id. ¶ 11.)

According to Kim: [Kim] told Jeong the exact situation except for the actual product in dispute or the company Xtaren had to indemnify. Instead, [Kim] disclosed to Jeong exactly half of the number of units Xtaren sold and exactly half of the price it was sold for and simply stated to Jeong that Xtaren received a demand for indemnification from a retailer for an apparel product that Xtaren sold them.

[Kim] told Jeong that the apparel product that Xtaren sold to the retailer was manufactured by a Chinese company in China and was purchased by Xtaren for sale to third parties. Jeong advised [Kim] that the Chinese company who manufactured the apparel product may be jointly liable, but that it would be difficult for Xtaren to pursue litigation against a Chinese company because of jurisdiction issues and advised [Kim] that the best way to resolve this case was to reach settlement before Plaintiff filed suit.

(Id. ¶¶ 12-13.) Kim may or may not have told Jeong that he was from Xtaren. (Compare Kim Decl. ¶ 8 ("I told Jeong that I was from Xtaren but I did not show Jeong the actual cease and desist letter."), with Kim Reply Decl. ¶ 9 ("When Jeong asked what company I was from, I told him I was from 'Cal's' and he understood and wrote it down as 'Kar's'.").)

Kim claims that Jeong advised him that the case could be settled for "somewhere between $4,000 to $6,000," and that Jeong would charge $2,000 in legal fees for a settlement, and more to represent Xtaren if it did not settle. (Id. ¶ 14.)

Jeong has no record of a meeting with Kim. (Jeong Decl. ¶ 5.) Xtaren claims that some handwritten notes from the meeting prove that it took place. (For the alleged notes, see Jeong Decl., Exh. 1.) Jeong identified the handwriting as his own, but believes the content pertains to a different case involving Star Fabrics and LA Printex. (Id. ¶ 8.) ...


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