Breaking Code Silence v. Papciak

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 BREAKING CODE SILENCE, Case No. 21-cv-00918-BAS-DEB 11 Plaintiff, ORDER DENYING DEFENDANTS’ 12 MOTIONS FOR ATTORNEYS’ FEES v. (ECF Nos. 54, 57) 13 CHELSEA PAPCIAK aka FILER, et al., 14 Defendants. 15 16 Presently before the Court are Defendant Jennifer Walker’s motion for attorneys’ 17 fees (ECF No. 57) and Defendants Jenna Bulis, Chelsea Filer, Martha Thompson, and 18 BreakingCodeSilence, Inc.’s motion for attorneys’ fees (ECF No. 54). Plaintiff Breaking 19 Code Silence (“BCS”) filed a response to both motions. (ECF Nos. 60–61.) 20 The Court finds these matters suitable for determination on the papers submitted and 21 without oral argument. See Civ. L.R. 7.1(d)(1). For the reasons stated below, the Court 22 DENIES the motions for attorneys’ fees. 23 I. BACKGROUND1 24 BCS “is a nonprofit public benefit corporation incorporated by survivors of 25 institutional child abuse and activists with the mission of helping survivors of institutional 26 child abuse.” (Second Am. Compl. (“SAC”) ¶ 12, ECF No. 19.) To brand its mission and 27 1 The Court incorporates the background set forth in its Order Granting Defendants’ Motions to 28 1 services, “BCS uses the trademarks BREAKING CODE SILENCE, BCS, and 2 #breakingcodesilence.” (Id. ¶ 21.) Chelsea Papciak (also known as Chelsea Filer), Jennifer 3 Walker, Jenna Bulis, and Martha Thompson “were involved with BCS from 2019 through 4 early 2021.” (Id. ¶ 24.) In early 2021, they “publicly separated themselves from BCS and 5 no longer actively participate in the organization.” (Id.) BCS alleges “[d]espite publicly 6 separating themselves from BCS, [Filer, Walker, Bulis, and Thompson] are using the 7 [trademarks] without authorization of [BCS].” (Id. ¶ 25.) 8 BCS further alleges these “Defendants have taken many of [BCS]’s social media 9 and email accounts and are holding them hostage and will not return them to [BCS] despite 10 numerous requests.” (SAC ¶ 28.) In addition, Bulis and Filer “filed a registration for a 11 Florida Profit Corporation by the name of BREAKINGCODESILENCE INC.”—the final 12 named Defendant. (Id. ¶ 42.) “This was done without the authorization of BCS, and after 13 publicly falsely accusing BCS (a nonprofit) of attempting to profit from the troubled teen 14 survivor movement.” (Id.) BCS claims Defendants “continue to make public posts on 15 social media alleging that Plaintiff is committing theft, bullying and threatening survivors,” 16 which “are causing the public to question [BCS]’s integrity.” (Id. ¶¶ 39–40.) 17 Based on these allegations, BCS brought nine causes of action, including trademark 18 infringement, unfair competition under the Lanham Act, conversion, and defamation. 19 (SAC ¶¶ 45–107.) Walker moved to dismiss the claims against her under Rule 12(b)(6). 20 (ECF No. 35.) Filer, Bulis, Thompson, and BreakingCodeSilence, Inc. also moved to 21 dismiss the claims against them under Rule 12(b)(6). (ECF No. 36.) 22 The Court granted Defendants’ motions, dismissing BCS’s trademark-related 23 federal claims (SAC ¶¶ 45–70) with leave to amend. (Dismissal Order.) The Court 24 declined to exercise supplemental jurisdiction over BCS’s remaining state law claims and 25 dismissed them without prejudice. (Id.) Finally, the Court set a deadline of March 4, 2022, 26 for BCS to file a third amended complaint, but BCS did not do so. (See Dismissal Order; 27 Order to Show Cause (“OSC”), ECF No. 50.) Accordingly, the Court ordered BCS to show 28 cause why the Court should not dismiss this case for failure to prosecute and warned BCS 1 that a failure to file an adequate response by April 4, 2022, would result in dismissal. (OSC 2 at 2.) 3 On March 9, 2022, BCS filed a Notice of Voluntary Dismissal to dismiss Filer, Bulis, 4 Thompson, and BreakingCodeSilence, Inc. without prejudice pursuant to Rule 41(a)(1). 5 (Not. of Dismissal of Defs., ECF No. 52.) On March 31, 2022, BCS filed a Notice of 6 Voluntary Dismissal to likewise dismiss Walker without prejudice. (Not. of Dismissal of 7 Walker, ECF No. 57.) 8 The request to voluntarily dismiss Walker under Rule 41(a)(1) was ineffective, 9 however, because Walker had filed an answer to the First Amended Complaint (ECF No. 10 16). (See Order Re: Notice of Dismissal, ECF No. 63.) Hence, the Court construed BCS’s 11 notice as a request for dismissal under Rule 41(a)(2). (Id.) The Court ultimately 12 determined Walker should be dismissed, but on the condition that the dismissal must be 13 with prejudice. (Id.; ECF No. 64.) 14 Now before the Court are Filer, Bulis, Thompson, and BreakingCodeSilence, Inc.’s 15 motion for attorneys’ fees under the Lanham Act. (ECF No. 54.) Walker similarly moves 16 for attorneys’ fees. (ECF No. 57.) BCS filed a response to both motions. (ECF Nos. 60– 17 61.) Filer, Bulis, Thompson, and BreakingCodeSilence, Inc. replied. (ECF No. 62.) 18 II. ANALYSIS 19 The Lanham Act provides that “[t]he court in exceptional cases may award 20 reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117(a). The Court thus first 21 considers whether Defendants are the “prevailing party.” The Court then turns to whether 22 this case is an “exceptional” one warranting fees. 23 A. Prevailing Party 24 Initially, Defendants must be the “prevailing party” to recover their attorneys’ fees. 25 15 U.S.C. § 1117(a). The Supreme Court explained a litigant is the “prevailing party” 26 when it secures an “enforceable judgment[] on the merits” or a “court-ordered consent 27 decree[]” because the litigant has received a “judicially sanctioned change in the legal 28 relationship of the parties.” Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health 1 & Hum. Res., 532 U.S. 598, 604–05 (2001)2; see also Tx. State Tchrs. Ass’n v. Garland 2 Indep. Sch. Dist., 489 U.S. 782, 793 (1989) (“The touchstone of the prevailing party inquiry 3 must be the material alteration of the legal relationship of the parties.”). This change must 4 be marked by “judicial imprimatur.” Buckhannon, 532 U.S. at 605. 5 Moreover, the Ninth Circuit recognizes that “a litigant can ‘prevail’ for the purposes 6 of awarding attorney’s fees as a result of judicial action other than a judgment on the merits 7 or a consent decree (provided that such action has sufficient ‘judicial imprimatur’).” 8 Carbonell v. I.N.S., 429 F.3d 894, 899 (9th Cir. 2005); see also CRST Van Expedited, Inc. 9 v. E.E.O.C., 578 U.S. 419, 432 (2016) (“There is no indication that Congress intended that 10 defendants should be eligible to recover attorney’s fees only when courts dispose of claims 11 on the merits.”). For example, “a defendant is a prevailing party following dismissal of a 12 claim if the plaintiff is judicially precluded from refiling the claim against the defendant in 13 federal court.” Cadkin, 569 F.3d at 1150. 14 1. Filer, Bulis, Thompson, and BreakingCodeSilence, Inc. 15 BCS voluntarily dismissed its claims without prejudice against Filer, Bulis, 16 Thompson, and BreakingCodeSilence, Inc. under Rule 41(a)(1). (Not. of Dismissal of 17 Defs.) A dismissal without prejudice typically does not confer prevailing party status upon 18 the defendant. See Cadkin, 569 F.3d at 1149 (holding voluntary dismissal of copyright 19 claims without prejudice does not confer prevailing party status on defendants); Oscar v. 20 Alaska Dep’t of Educ. & Early Dev., 541 F.3d 978, 982 (9th Cir. 2008) (holding “dismissal 21 without prejudice did not confer prevailing party status upon the defendant” under the 22 Individuals with Disabilities Education Act). “Because the defendant remains subject to 23 the risk of refiling, . . . a voluntary dismissal without prejudice does not alter the legal 24 25 26 2 Although Buckhannon was not a Lanham Act trademark infringement case, “the distinction is immaterial.” See Cadkin v. Loose, 569 F.3d 1142, 1148–49 (9th Cir. 2009) (“[W]e have understood the 27 Court’s construction of ‘prevailing party’ applies to federal fee shifting statutes other than the FHAA that contain that phrase, which is appropriate given the Court’s reliance on a dictionary definition for its 28 1 relationship with the parties.” Nutrivita Lab’ys, Inc. v. VBS Distrib. Inc., 160 F. Supp. 3d 2 1184, 1189 (C.D. Cal. 2016). 3 Despite this voluntary dismissal rule, Filer, Bulis, Thompson, and 4 BreakingCodeSilence, Inc. argue there has been a material alteration of the legal 5 relationship of the parties because BCS lost on the motion to dismiss and failed to amend 6 its complaint. (Defs.’ Reply at 3.) This argument is unavailing. Though Defendants are 7 correct that the Court granted their motion to dismiss BCS’s Second Amended Complaint, 8 the dismissal was with leave to amend and without prejudice. (Dismissal Order at 9.) This 9 dismissal did not alter the legal relationship of these parties because Defendants remained 10 subject to the risk of refiling. See Oscar, 541 F.3d at 981 (“[W]e are persuaded that 11 dismissal without prejudice does not alter the legal relationship of the parties because the 12 defendant remains subject to the risk of re-filing.”).3 13 Similarly, BCS’s failure to file a third amended complaint does not confer prevailing 14 party status on Filer, Bulis, Thompson, or BreakingCodeSilence, Inc. Defendants argue 15 they are entitled to this status because “BCS waited until after the time for amendment had 16 expired . . . , and in the [face] of an imminent involuntary dismissal, filed a voluntary one.” 17 (Defs.’ Reply at 3.) Indeed, the Dismissal Order gave BCS until March 4, 2022, to file a 18 third amended complaint. (See Dismissal Order at 9.) And when BCS failed to file an 19 amended complaint, the Court ordered BCS to show cause as to why the Court should not 20 dismiss this case for failure to prosecute and stated “[BCS] may show adequate cause by 21 filing, or moving for an extension of time to file, an amended complaint by no later than 22 23 3 The Court notes there have been instances where defendants were entitled to prevailing party status even though the plaintiff filed a notice of voluntary dismissal without prejudice. See W. Wind 24 Energy Corp. v. Savitr Cap., LLC, No. C 12-4806 PJH, 2013 WL 3286190, at *6 (N.D. Cal. June 27, 2013) (holding that even though plaintiff filed a notice of voluntary dismissal without prejudice, defendant 25 is the prevailing party under the Lanham Act because defendant “successfully defended against 26 [plaintiff’s] request for injunctive relief, resulting in the court’s denial of the requested relief based on a determination of the merits of [plaintiff’s] claims”); see also Sci. Weight Loss, LLC v. U.S. Med. Care 27 Holdings, LLC, No. CV 08-2852PSG(FFMX), 2009 WL 2151365, at *4 (C.D. Cal. July 15, 2009) (same). The Court finds these cases inapposite because unlike the defendants in those cases, Defendants here did 28 1 April 4, 2022.” (See OSC at 2.) Rather than amend its pleading or move for more time, 2 BCS exercised its right to dismiss the case voluntarily because these Defendants never 3 answered or moved for summary judgment. See United States v. Real Prop. Located at 4 475 Martin Lane, Beverly Hills, CA, 545 F.3d 1134, 1145–46 (9th Cir. 2008); Am. Soccer 5 Co. v. Score First Enters., a Div. of Kevlar Indus., 187 F.3d 1108, 1112 (9th Cir. 1999). 6 This voluntary dismissal without prejudice mooted the Court’s Order to Show Cause. 7 Therefore, BCS is not “judicially precluded from refiling [its claims] against the 8 [Defendants],” and the Court finds no material alteration in the legal relationship among 9 these parties. See Oscar, 541 F.3d at 981. 10 In short, Defendants Filer, Bulis, Thompson, and BreakingCodeSilence, Inc. are not 11 prevailing parties under the Lanham Act’s fee-shifting provision because the claims against 12 them were dismissed without prejudice. The Court therefore denies these Defendants’ 13 motion for attorneys’ fees. 14 2. Walker 15 Walker is not in the same position as the other Defendants. As mentioned, because 16 she filed an answer, Walker cut off BCS’s right to voluntarily dismiss its action against 17 her. See Wilson v. City of San Jose, 111 F.3d 688, 692 (9th Cir. 1997) (“Once the defendant 18 serves an answer or a motion for summary judgment, . . . the plaintiff may no longer 19 voluntarily dismiss under Rule 41(a)(1)[.]”). The Court ultimately dismissed Walker with 20 prejudice. (ECF No. 64.) Hence, Walker is a “prevailing party” under 15 U.S.C. § 1117(a). 21 See Cadkin, 569 F.3d at 1150. 22 B. Exceptional Case 23 Only Walker’s motion survives the threshold, prevailing party inquiry. To recover 24 fees, Walker must also show that this case is exceptional. 15 U.S.C. § 1117(a). While the 25 Lanham Act does not define “exceptional,” the Ninth Circuit has relied on the Supreme 26 Court’s decision in a Patent Act case, Octane Fitness, LLC v. ICON Health & Fitness, Inc., 27 572 U.S. 545 (2014), to define an exceptional case. See SunEarth, Inc. v. Sun Earth Solar 28 1 Power Co., 839 F.3d 1179, 1180 (9th Cir. 2016) (explaining that the fee-shifting provisions 2 in both the Patent Act and the Lanham Act are “parallel and identical”). 3 In doing so, the Ninth Circuit defined an exceptional case as “simply one that stands 4 out from others with respect to the substantive strength of a party’s litigating position 5 (considering both the governing law and the facts of the case) or the unreasonable manner 6 in which the case was litigated.” SunEarth, 839 F.3d at 1180. The Ninth Circuit also cited 7 a list of nonexclusive factors to determine whether a case is exceptional, including 8 “frivolousness, motivation, objective unreasonableness (both in the factual and legal 9 components of the case) and the need in particular circumstances to advance considerations 10 of compensation and deterrence.” Id. at 1181 (quoting Octane Fitness, 572 U.S. at 554 11 n.6; Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)). Further, “district courts 12 analyzing a request for fees under the Lanham Act should examine the ‘totality of the 13 circumstances’ to determine if the case was exceptional, . . . exercising equitable discretion 14 in light of the nonexclusive factors identified in Octane Fitness and Fogerty, and using a 15 preponderance of the evidence standard.” Id.; see also Octane Fitness, 572 U.S. at 554 16 (“‘[T]here is no precise rule or formula for making these determinations,’ but instead 17 equitable discretion should be exercised . . . .”). 18 Considering this guidance, the Court finds the instant action is not exceptional under 19 the Lanham Act. This case does not “stand[] out from others with respect to the substantive 20 strength of a party’s litigating position.” See SunEarth, 839 F.3d at 1180. 21 Walker argues the case “had no merit” because BCS did not have a registered mark 22 and “knew that there was no legitimate claim to any common law mark.” (Walker’s Mot. 23 at 2.) Indeed, in the Dismissal Order, the Court found “BCS [did] not plausibly allege it 24 owns the unregistered mark through an assignment” because “[t]he Complaint [did] not 25 allege who transferred the rights to BCS, the date of the assignment, the scope of the 26 assignment, or any other information.” (Dismissal Order at 8.) However, “mere failure of 27 proof on a claim or lack of success in a lawsuit is not sufficient to warrant a finding that a 28 case is exceptional.” Caiz v. Roberts, No. CV 15-09044-RSWL-AGRx, 2017 WL 830386, 1 at *5 (C.D. Cal. Mar. 2, 2017); see also Applied Info. Scis. Corp. v. eBAY, Inc., 511 F.3d 2 966, 969, 973 (9th Cir. 2007) (holding that despite plaintiff’s failure to produce “any 3 admissible evidence,” case was not exceptional because “[plaintiff’s] case was not 4 frivolous and . . . [plaintiff] raised debatable issues”); Sophia & Chloe, Inc. v. Brighton 5 Collectibles, Inc., No. 12-CV-2472-AJB-KSC, 2019 WL 1429588, at *10 (S.D. Cal. Mar. 6 29, 2019) (concluding defendant failed to show case was exceptional under Lanham Act 7 because “[defendant’s] only basis for such a finding boils down to [plaintiff’s] failure to 8 present enough evidence to defeat its summary judgment motion”). Although BCS was 9 unable to plausibly show it had enforceable trademark rights, the Court is unconvinced that 10 this case “stands out from others with respect to the substantive strength of a party’s 11 litigating position.” See SunEarth, 839 F.3d at 1180. 12 Furthermore, the Court is not persuaded by a preponderance that the case was 13 litigated unreasonably. See SunEarth, 839 F.3d at 1180. Walker argues “[BCS’s] conduct 14 is clearly both egregious and in bad faith,” and she goes so far as to charge that BCS “made 15 up the knowingly false claims that one of its ‘volunteers’ had a claim [to the trademark], 16 and assigned it to BCS.” (Walker’s Mot. at 4.)4 The evidence submitted does not 17 convincingly show BCS manufactured “knowingly false claims.” Hence, the Court is 18 unpersuaded by Walker’s argument that this action was unreasonably litigated. 19 Moreover, BCS presented good faith arguments through its pleadings and briefing, 20 explaining why it believes it owns the Breaking Code Silence trademark and how 21 Defendants allegedly infringed on its trademark. (See SAC ¶¶ 12–44.) For example, BCS 22 alleged it was formed by community members who used the mark previously, and BCS 23 4 In support of this charge, Walker points to a declaration from the individual who first started 24 using the phrase Breaking Code Silence. (ECF No. 57-2.) In that declaration, the individual incorporates a social media post discussing his use of the phrase Breaking Code Silence and declares “the statements 25 made in that post are true, correct, and accurate.” (Id.) The Court cannot overlook the hearsay concerns 26 with this evidence. See Chapman v. Maraj, No. 2:18-cv-09088-VAP-SSx, 2020 WL 6260021, at *4–5 (C.D. Cal. Sept. 16, 2020) (concluding social media posts were hearsay); see also Murray v. Billings 27 Garfield Land Co., No. CV 14-106-BLG-SPW, 2016 WL 2963419, at *2 (D. Mont. May 20, 2016) (finding statements contained in exhibits attached to declaration were hearsay because they “are 28 1 || claimed the entity has been using the mark across its social media and other platforms for 2 ||several years. (Ud. 9] 14-23.) BCS also alleged Defendants used its trademark without its 3 || authorization and attached exhibits in support of its claims. (See SAC 26-27, 36-42; 4 also Exs. A-J to SAC, ECF No. 19-1.) The Court therefore finds it “difficult . . . to 5 ||conclude . . that it was frivolous or objectively unreasonable for [BCS] to pursue this 6 || litigation.” See Caiz, 2017 WL 830386, at *5; see also Deckers Outdoor Corp. v. Romeo 7 || & Juliette, Inc., No. 2:15-CV-02812-ODW(CWx), 2016 WL 5842187, at *3 (C.D. Cal. 8 5, 2016) (“[W]here a party has set forth some good faith argument in favor of its 9 ||position, it will generally not be found to have advanced ‘exceptionally meritless 10 ||claims.’”’). Ultimately, considering the totality of the circumstances, the Court finds the 11 || instant action is not an exceptional case warranting attorneys’ fees under the Lanham Act. 12 In sum, the Court denies Walker’s motion for attorneys’ fees. And although the 13 || other Defendants’ motion for attorneys’ fees falters at the prevailing party stage, the Court 14 || notes that its exceptional case analysis applies with equal force to their motion. 15 || IV. CONCLUSION 16 For the foregoing reasons, the Court DENIES Defendants’ motions for attorneys’ 17 || fees. CECF Nos. 54, 57.) The Clerk of Court shall close this case. 18 IT IS SO ORDERED. 19 / yy 20 | DATED: September 13, 2022 sii A 5 Haha, 6 1 United States District Judge 22 23 24 25 26 27 28