law offices of marjorie barrios€¦ · findings and recommendation regard-ing plaintiff's...

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LAW OFFICES OF MARJORIE BARRIOS Marjorie Barrios, Esq. (Bar No.: 242159) P.O. Box 500 San Bernardino, CA 92402 Office: (909) 888-6000 Facsimile: (909) 888-6001 E-mail: [email protected] Attorneys for Movants

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

In re: CITY OF SAN BERNARDINO, CALIFORNIA

) ) ) ) ) ) ) ) ) ) ) ) )

Case No.: 6:12-BK-280006-MJ NOTICE OF ERRATA Date: April 1, 2015 Time: 9:00 a.m. Place: Courtroom 301 3420 Twelfth Street Riverside, CA 92501-3819

)

Due to a scrivener’s error the citation to Sunbeam Prods. v. Chi. Am. Mfg.,

LLC, 686 F.3d 372, 2012 U.S. App. LEXIS 13883 (7th Cir. Ill., 2012), cert denied

Sunbeam Prods. v. Chi. Am. Mfg., LLC 133 S. Ct. 790; 184 L. Ed. 2d 596 (2012).

in Movants’ reply is incorrect. Sunbeam is inapposite to this case. The correct

citation is to Dominic’s Restaurant of Dayton, Inc. v. Mantia, 683 F.3d 757 (6th

Cir. 2012). This case, Dominic’s, was correctly attached as Exhibit “B”. (The

citation was incorrect.) The quotations found in the reply were all from Dominic’s,

as well as the ruling.

Case 6:12-bk-28006-MJ Doc 1440 Filed 03/31/15 Entered 03/31/15 17:00:09 Desc Main Document Page 1 of 2

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Thus, the citation on 8: 5-7 should read Dominic’s Restaurant of Dayton,

Inc. v. Mantia, 683 F.3d 757, 760 (6th Cir. 2012). The remaining citations

referring to Sunbeam, supra, should read Dominic’s, supra. [9:11, 10:7,20, 13:9]

Two District Court cases applying Dominic’s Restaurant of Dayton, Inc. v.

Mantia, 683 F.3d 757, 760 (6th Cir. 2012) within the Ninth Circuit are attached as

Exhibits “A” and “B” of this complaint. Those cases are: AAA v. Oakhurst Lodge,

2012 U.S. Dist. LEXIS 179753 (E.D. Cal. Dec. 18, 2012), Case No. 1:12-cv-0854

LJO-BAM, ComUnity Collectors LLC v. Mortg. Elec. Registration Servs., 2012

U.S. Dist. LEXIS 110690 (N.D. Cal. Aug. 7, 2012), Case No. C-11-4777 EMC.

Counsel apologizes for any inconvience or confusion this error may have

caused.

Respectfully submitted,

DATE: 03/31/2015 LAW OFFICES OF MARJORIE BARRIOS

By: /s/ Marjorie Barrios MARJORIE BARRIOS, Esq.

Attorney for the Plaintiffs

Case 6:12-bk-28006-MJ Doc 1440 Filed 03/31/15 Entered 03/31/15 17:00:09 Desc Main Document Page 2 of 2

EXHIBIT “A”

Case 6:12-bk-28006-MJ Doc 1440-1 Filed 03/31/15 Entered 03/31/15 17:00:09 Desc Exhibit Page 1 of 17

AMERICAN AUTOMOBILE ASSOCIATION, INC., Plaintiff, vs. OAKHURST LODGE, et. al., Defendants.

1:12-cv-0854 LJO-BAM

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

2012 U.S. Dist. LEXIS 179753

December 18, 2012, Decided December 18, 2012, Filed

COUNSEL: [*1] For American Automobile Associa-tion, a Connecticut corporation, Plaintiff: Michael D. Adams, Rutan and Tucker, LLP, Costa Mesa, CA.

JUDGES: Barbara A. McAuliffe, UNITED STATES MAGISTRATE JUDGE.

OPINION BY: Barbara A. McAuliffe

OPINION

FINDINGS AND RECOMMENDATION REGARD-ING PLAINTIFF'S APPLICATION FOR DEFAULT JUDGMENT

(Document 22)

On May 24, 2012, Plaintiff American Automobile Association, Inc. ("Plaintiff" or "AAA") filed the present motion for default judgment against Oakhurst Lodge ("Defendant" or "Oakhurst Lodge"). 1 The motion was referred to this Court pursuant to 28 U.S.C. § 636(b)(1)(B) and Local Rule 302. The Court deemed the matter suitable for decision without oral argument pur-suant to Local Rule 230(g), and vacated the hearing scheduled for November 9, 2012. The Court thereafter ordered Plaintiff to provide supplemental briefing on November 29, 2012. Plaintiff filed its supplement brief on December 5, 2012. Having reviewed the moving and supplemental brief, and the Court's file, the Court rec-ommends that Plaintiff's Motion for Default Judgment be GRANTED. (Doc. 22).

1 Plaintiff does not seek default judgment against Defendant Chetankumar Patel. Plaintiff believes Patel is the former owner of Oakhurst Lodge, [*2] but is no longer involved with the entity. Accordingly, the Court orders that Plain-tiff file a notice of voluntary dismissal as to De-fendant Chetanukmar Patel or a notice informing the Court that it intends to proceed to trial against Defendant Chetanukmar Patel within fifteen (15) days of this order.

FACTUAL AND PROCEDURAL BACKGROUND

This case arises out of the allegedly infringing use by Defendant Oakhurst Lodge of Plaintiff American Automobile Association's ("AAA") trademarks. (Pl.'s Compl., Doc. 1). Plaintiff is the owner of the AAA trademarks (the "AAA Marks"), used in connection with a number of services, including but not limited to rating tourist accommodations. (Pl.'s Compl. at ¶ 3, Doc. 1). AAA has used its "famous" and distinctive AAA Marks for over 100 years, in various industries, and has regis-tered more than 100 of these marks with the United States Patent and Trademark Office ("USPTO"). (Pl.'s Compl. at ¶ 14). Defendant Oakhurst Lodge is a Califor-nia corporation engaged in the business of providing tourist accommodations using the AAA Marks, includ-ing, displaying signage on its premises bearing the AAA Marks and representing Defendant's business as ap-proved by AAA. Plaintiff [*3] filed the underlying complaint alleging that Defendant displayed the AAA


U.S. Dist. LEXIS 179753, *

Marks on its website and in advertising without Plain-tiff's authorization. ��. at ¶ 27.

When Plaintiff discovered Defendant's use of the AAA Marks, it sent several cease and desist letters to Defendant via certified mail. ��. at ¶ 18. Despite Plain-tiff's demands, Defendant has failed to cease and desist from all uses of the AAA Marks in connection with their goods and services. ��. at ¶ 19. Specifically, Defendant's website advertising Oakhurst Lodge continues to contain references to the AAA Marks (stylized logo) on its ac-commodations page. See �a��u�� Lo�ge �cco��o�a��o��, http://www.oklodge.com/accom.html (last visited Nov. 8, 2012). On May 24, 2012, Plaintiff filed the in-stant suit alleging claims for trademark infringement (1� U.S.C. § 111�), false designation of origin (1� U.S.C. § 112�(a)), trademark dilution (1� U.S.C. § 112�(c)(1), Cal. Bu�. � ��o�. Co�e § 1�330, and common law), and unfair competition (Cal. Bu�. � ��o�. Co�e § 1�200). (Doc. 1).

The Summons and Complaint were served on De-fendant by substitute service the agent for service of process, on June 5, 2011. (Doc. 13). Defendant has failed to [*4] file an answer or otherwise appear in this action. On July 24, 2012, the Clerk entered default against De-fendant Oakhurst Lodge. (Doc. 17).

Notice of the request for entry of default and the in-stant motion for default judgment and supporting papers were served by mail on Defendant at its last known ad-dress. Despite being served with the motion by United States Mail, Defendant has not responded. As a result, Plaintiff seeks a default judgment against Defendant as well as a permanent injunction.

DISCUSSION

A. Le�al Standard

[HN1] �e�e�al Rule o� C��l ��oce�u�e ��provides, the Court may enter default judgment against a defendant who has failed to plead or otherwise defend an action. "The district court's decision whether to enter default judgment is a discretionary one." �l�abe �. �l�abe� 616 �.2� 108�� 10�2 (�� C��. 1�80).

[HN2] The Ninth Circuit has provided seven factors for consideration by the district court in exercising its discretion to enter default judgment: (1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's sub-stantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibil-ity of a dispute concerning material [*5] facts; (6) whether the default was due to excusable neglect; and (7) the strong policy of favoring decision on the merits. ��el �. �cCool� �82 �.2� 1��0� 1��1��2 (�� C��. 1�86).

[HN3] In assessing the ��el factors, all well-pleaded factual allegations in the complaint are taken as true, except those with regard to damages. �ele��eo S��.� ��c. �. �e��e��al� 826 �.2� �1�� 1��18 (�� C��. 1�8�).

B. J�risdicti�n and Service �f Pr�cess

[HN4] Courts have an affirmative duty to examine their own jurisdiction--both subject matter and personal jurisdiction--when entry of judgment is sought against a party in default. �� e �ul�� 1�2 �.3� �0�� 12 (�� C��. 1��). Since this is a trademark action, federal subject matter jurisdiction arises under the Lanham Act, 1� U.S.C. §§ 111�and 112�(a). Personal jurisdiction arises from Defendant's commercial activities within Califor-nia. See ��a� � Co. �. ��e�be�g �ac�. Co.� �13 �.2� ��8� �60 (�� C��. 1��0).

The Court must also assess whether the Defendant was served properly with notice of this action. Plaintiff personally served the Summons and Complaint on De-fendant. (Doc. 13). A declaration of service filed with the Court demonstrates that Defendant was properly [*6] served with process on June 5, 2012 by substituted ser-vice on Jules Allen, the day manager of Oakhurst Lodge. ��. R. C��. �. �(e)(1). Further, notice of the complaint and this motion are not in dispute. After the complaint was served, Plaintiff received a letter from Peter L. Fear stating that he represents Oakhurst Lodge in its Chapter 11 proceeding (�� e �a��u�� Lo�ge� ��c. Case No. 11-17165-A-11). Mr. Fear expressly advised that he does not represent Defendant in any potential litigation mat-ters, but that he would speak to Defendants about the lawsuit and their use of the AAA Marks. (Adams Decl. ¶ 5, Doc. 22, Ex. 2). On July 18, 2012, Plaintiff's counsel sent Mr. Fear a letter stating its intention to request an entry of default given Defendant's failure to respond to the Complaint. (Adams Decl. ¶ 7). The same day, Mr. Fear responded to the letter by email stating, "I have in-formed them as you send me things." ��. at 8. Plaintiff's representations of contact with Defendant through its bankruptcy counsel further affirms that Defendant has sufficient notice of the complaint. Thus, the Court finds Plaintiff properly effected service of process. ��. R.C��. �. �(e)(2)(�) (an individual [*7] may be served "by delivering a copy of the summons and of the complaint to the individual personally"); ��. R. C��. �. �(�)(1)(B)(a corporation may be served "by delivering a copy of the summons and of the complaint to an officer, a man-aging or general agent, or any other agent authorized by appointment or by law to receive service of process."). Therefore, the Court has both subject matter and personal jurisdiction.

C. Ban�r��tc� Pr�ceedin�s



In light of defendant's bankruptcy, the Court must examine whether the instant trademark infringement ac-tion is subject to the automatic stay provisions of 11 U.S.C. § 362. On June 22, 2011, Defendant filed a vol-untary petition for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Eastern Dis-trict of California. �� e �a��u�� Lo�ge, Case No. 11-17165-A-11. [HN5] As a general rule, the filing of a bankruptcy petition operates as a stay of the commence-ment or continuation of a judicial proceeding against the debtor that was or could have been commenced before the commencement of the bankruptcy proceeding. 11 U.S.C. § 362(a)(1); �ee �� e �a�e� ��8 �.2� 1122� 1123 (�� C��. 1��1). Although Defendant's Chapter 11 bank-ruptcy [*8] case is currently pending before the Bank-ruptcy Court for the Eastern District of California, [HN6] trademark infringement is a tort that is not protected by the automatic stay of the Bankruptcy Code. �o��c�� Re��. o� �a��o�� c. �. �a��a� 683 �.3� �� 60 (6�� C��. 2012) (default judgment affirmed and injunction issued for trademark infringement and trademark dilution despite defendant's pending bankruptcy). The automatic stay does not apply in a trademark infringement pro-ceeding.

[HN7] One of the overriding purposes of the Bank-ruptcy Code is to provide debtors with breathing room from their creditors to increase the chances of a success-ful reorganization. �� e �o��e�� l��e� Co��.� 3�� B.R. 338� 380 (S.�.�.�. 2006). Thus, the Bankruptcy Code provides for a stay of other proceedings under cer-tain circumstances. In staying other proceedings, the primary goal of the Bankruptcy Code is to protect inter-ests in a debtor's property and to shield the estate from direct action taken by creditors against a debtor's real or personal property. La�a�� L��e� �. �e�� e��a��e�� Co��.� 2�� B.R. �6� ��60 (�.�.�. 2000).

[HN8] The bankruptcy stay does not apply automat-ically to an act or proceeding that [*9] does not affect the property of the debtor's estate. �� e Roo�� 102 B.R. ��0� ��2 (Ba��. �.�. �a. 1�8�), a��2� �.2� 6�� (�� C��. 1��1) ("matters which do not bear on a debtor's economic status [...] are not stayed by a bankruptcy court"). Further, automatic bankruptcy stay protection does not protect the tortious use of a debtor's property by the debtor. See �o��c�� Re��. o� �a��o� �. �a��a� 2010 U.S. ��. L��S 3�636 (S.�. ��o �a�. 2�� 2010)(bankruptcy stay did not prevent injunctive relief in a patent infringement action against the debtor); �ee al�o Se��o ��o� Co��. �. �u��o�e ��e��a��o�al� ��c.. 1�0 �.3� 1360� 136� (�e�. C��. 1��)(a bankruptcy stay of proceedings did not prevent an injunction against the debtor in patent infringement case where the injunction would not deplete the assets of the debtor); La�a�� 2�� B.R. a� 60 (a lawsuit brought during bankruptcy pro-

ceedings to enjoin the production or sale of an allegedly infringing product is not subject to the automatic bank-ruptcy stay protection because it goes to the tortious use of property by the debtor).

In La�a�� L��. �. �e�� e��a��e�� Co��., the New Jersey District Court examined whether the automatic [*10] stay barred Plaintiff's patent suit. In La�a��, the debtor argued that a creditor's attempt to enjoin the sale of an allegedly infringing toy would "exercise control over" property of the estate in violation of the automatic stay. The Court disagreed, stating:

At its core, plaintiff's suit is an attempt to prevent allegedly unlawful conduct, not an attempt to directly exercise control over the property of the bankruptcy estate. Larami seeks to prevent Yes! from in-fringing on its patented water gun design. Larami does not seek to seize control of any of Yes!'s inventory or equipment. In-deed, Larami agrees that Yes! will remain in possession of the existing inventory and that it will be free to modify the water guns in order to avoid future infringe-ment.

. . .

Sec��o� 362(a)(3) was intended to prevent interference with a bankruptcy court's orderly disposition of the property of the estate, it was not intended to pre-clude post-petition suits to enjoin unlaw-ful conduct. If this section were read to prevent the injunctive relief sought here, bankrupt businesses which operated post-petition could violate patent rights with impunity. . . . The Court declines toread § 362(a)(3) so broadly.

This [*11] Court agrees. The core issue in the in-stant matter is Defendant's alleged infringement on Plaintiff's service mark. Because this matter involves Defendant's use of its property to commit a tort, specifi-cally the tort of trademark and service mark infringe-ment, application of the automatic stay would permit Defendant to continue to commit this tort. [HN9] De-fendant's alleged commission of a tort is not protected by the Bankruptcy Code. See �o��c�� Re��. o� �a��o�� c.� 683 �.3� a� �61; La�a�� 2�� B.R. a� 60; Se��o ��o�� 1�0 �.3� a� 136�; �� e Roo�� 102 B.R. a� ��3. Since, the bankruptcy stay protection does not reach this matter, the Court will consider whether Plaintiff is enti-tled to default judgement in this action.



D. T�e Eitel Fact�rs

In the Ninth Circuit, a Court's analysis of a motion for default judgment is guided by the standard set forth in ��el �. �cCool� �82 �.2� a� 1��1��2. Application of the facts of this case to the ��el factors favor entry ofdefault judgment against Defendant. First, if the motion were denied, Plaintiff will be prejudiced if default is not entered because absent judgment AAA will be without recourse for recovery.

Second, the Complaint is sufficient to [*12] sup-port entry of a default judgment as to Oakhurst Lodge. Based on the factual allegations set forth in the Com-plaint, AAA is entitled to judgment against Defendant. Defendant has continually, knowingly and willfully vio-lated AAA's rights in the AAA Marks by continuing to make unauthorized use of the Marks on their website. See �a��u�� Lo�ge �cco��o�a��o��, http://www.oklodge.com/accom.html (last visited Nov. 8, 2012). Defendant's infringing use has damaged, and will continue to damage, the reputation, recognition, and goodwill associated with the AAA Marks.

Third, given the sufficiency of the Complaint, and Defendant's default, there is no dispute concerning the material facts. Fourth, Defendant was properly served, and Defendant's bankruptcy attorney has been in com-munication with Plaintiff's counsel regarding this case, so it is unlikely that Defendant's failure to answer and the resulting default resulted from excusable neglect. S�a�g�a� �u�o�a��o� ��u�e�� Co.� L��. �. �ue�� 1�� . Su��. 2� �� 100� (�.�. Cal. 2001).

Finally, with respect to the amount at stake, Plaintiff seeks injunctive relief rather than monetary damages, to prevent any future infringement of their trademark. [*13] This factor also weighs in favor of granting default judgment.

In sum, the Court finds the possibility of prejudice to Plaintiff in the absence of default judgment would be significant. Further, Plaintiff's Complaint is sufficient and serves to establish the merits of its substantive claims. No money is at stake, and in light of Defendant's failure to respond to proper service of the Summons and Complaint, there is little possibility of a dispute con-cerning material facts, nor is there any indication that Defendant's default was due to excusable neglect. While there exists a strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits, this policy should not serve to preclude Plaintiff from the remedy it seeks. ��el� �82 �.2� a� 1��1�1��2.

E. Trademar� Infrin�ement

[HN10] Sec��o� 111�(1)(a) of the Lanham Act pro-hibits "use in commerce [of] any reproduction, counter-feit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connec-tion with which such use is likely to cause confusion, or to cause mistake, or to deceive." [HN11] Sec��o� 112�(a)of the Lanham Act [*14] prohibits "in connection with any goods or services, or any container for goods" any "false designation of origin, false or misleading descrip-tion of fact, or false or misleading representation of fact, which... is likely to cause confusion or to cause mistake, or to deceive as to the affiliation, connection, or associa-tion of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, ser-vices, or commercial activities by another person."

[HN12] To establish a violation of Sec��o� 111�(1)(a) and Sec��o� 112�(a) of the Lanham Act, a plaintiff must establish the following: (1) that it owns a valid, protectible mark; and (2) that there is a likelihood of confusion between its mark and defendant's mark. B�B �a��a�e� ��c. �. �a�g�� u�.� �6� �.3� 383� 38� (8�� C��. 200�). [HN13] To determine whether there is a likelihood of confusion between the parties' marks, a court must consider eight factors: "(1) strength of mark; (2) proximity of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels used; (6) type of goods and the degree of care likely to be exercised by the purchaser; (7) the defendant's intent in selecting [*15] the mark; and (8) the likelihood of expansion of the product lines." �� c. �. Slee�c�a�� Boa�� .2� 3�1� 3�8�� (�� C��. 1��), ab�oga�e� o� o��e� g�ou�� a��el� ��c. �. �al��g �ou��a�� o�uc��o�� 3�3 �.3� ��2� 810 �. 1� (�� C��. 2003). The Slee�c�a��factors are not an exhaustive list of factors relevant to a judicial determination of the likelihood of consumer confusion, and courts must consider such fac-tors as are relevant to the facts of the particular situation. �e��o�� u�o�a��o�� c. �. ��a�ce� S��e�� Co��ce�� c.� 638 �.3� 113�� 11�2 (�� C��. 2011).

Plaintiff has established trademark infringement un-der the Lanham Act. Plaintiff has shown that its marks are valid trademarks. ��S�a� ��c�u�e�� c. �. U�ge�� 1� �. Su��. 2� 33�� 3�3 (S.�.�.�. 1��8). Plaintiff filed United States Patent Trademark Office ("USPTO") documents reflecting its rights to the AAA Marks. The registered marks include Reg. Nos. 829,265 and 2,158,654. (Doc. 1. Ex. 2). This document establishes that Plaintiff's mark is federally registered and is a valid, protectible mark. See �ob�o��o �� LLC �. �all� �e��a� LLC� 602 �.3� 1108� 111� (�� C��. 2010)("There can be no serious dispute [*16] with the princi-ple that a federal trademark registration of a particular mark supports the distinctiveness of that mark, because



the USPTO should not otherwise give it protection."). Second, Plaintiff has established a likelihood of confu-sion. As reflected in the USPTO documents, Plaintiff's AAA Marks have been utilized by the American Auto-mobile Association since 1967 and registered for several decades. (Pl.'s Compl, Ex. 2). The fact that Plaintiff's mark has been used for over a forty years indicates the AAA Marks are very strong. Further, as evidenced by the Defendant's website, Plaintiff has shown that Defendant continues to use Plaintiff's identical AAA Marks. Finally, both Plaintiff's and Defendant's products are advertised and available in the travel and accommodation industry. While there are other factors to consider, these are three of the most important ones. See ��ea��e�� o�. ��ou�� c. �. S�� S�u��o� 1�2 �.3� 112�� 1130 (�� C��. 1��8) (strength of the mark; similarity of the mark; and relatedness of the goods deemed most important). Thus, Plaintiff has proven trademark infringement under the Lanham Act.

F. Trademar� Dil�ti�n

Plaintiff's complaint also alleges a claim [*17] of dilution. [HN14] To prevail on a federal dilution claim, the plaintiff must demonstrate that: (1) the plaintiff's mark is famous; (2) the defendant used the plaintiff's mark after the plaintiff's mark became famous; (3) the defendant's use was commercial and in commerce; and (4) the defendant's use of the plaintiff's mark has likely caused dilution. See �a�a �o�� c. �. �a��el� ��c.� �18 �.3� 628� 633 (�� C��. 2008) (citing 1� U.S.C. § 112�(c)(1) and noting that after the 2006 amendments to the statute, a plaintiff need only prove a likelihood of dilution rather than actual dilution). The Lanham Act defines "dilution by blurring" as "association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the fa-mous mark." 1� U.S.C. § 112�(c)(2)(B).

Plaintiff has established trademark dilution. First, the AAA Marks are famous and distinctive. They are quintessential and distinctive marks, entitled to the strongest and broadest protection available from the trademark laws. Through longstanding use, advertising, and registration, the AAA Marks have achieved a high degree of consumer recognition, denoting quality ac-commodations and services [*18] in the travel industry. The public and the trade recognize the AAA Marks as designating products and services endorsed by Plaintiff.

Second, Defendant's use of the AAA Marks began after Plaintiff established their famous marks, seeking a free ride on the value of Plaintiff's trademarks. Finally, Defendant's use of the AAA Marks on its commercial website without authorization dilutes the AAA Marks by diminishing the marks' value as a means of identifying and distinguishing Plaintiff's products and services. See

�a��el� 2�6 �.3� a� �03. Accordingly, Plaintiff has es-tablished dilution. �a�a �o�� c.� �18 �.3� a� 63�; Coac�� c. �. Sac a �a�� 2012 U.S. ��. L��S 1��0� a� �12 (�.�. Cal. �o�. 6� 2012).

G. In��nctive Relief

In light of Defendant's infringement, AAA seeks to permanently enjoin Defendant from using AAA's trade-marks or similar designations without its authorization. [HN15] Under the Lanham Act, "the district court [has] the 'power to grant injunctions according to principles of equity and upon such terms as the court may deem rea-sonable, to prevent the violation of any right' of the trademark owner." Re�o �� Rac��g �� . �cCo�� 2 �.3� 1126� 113� (�� C��. 2006). "Injunctive [*19] relief is the remedy of choice for trademark and unfair competition cases, since there is no adequate remedy at law for the injury caused by a defendant's continuing infringement." Ce��u�� 21 Real ��a�e Co��. �. Sa��l�� 8�6 �.2� 11�� 1180 (�� C��. 1�88). Plaintiff also seeks an order, pursuant to 1� U.S.C. § 1118 to impound and destroy any print directory, internet directory, or website that Defendant has caused to display the AAA Marks. (Doc. 23). The Court notes that [HN16] 1� U.S.C. § 1118does not make impoundment a mandatory form of relief; rather, the Court "may order the destruction or other rea-sonable disposition of all copies ... found to have been made or used in violation of the trademark owner's ex-clusive rights . .."

[HN17] For the Court to grant a permanent injunc-tion, Plaintiff must demonstrate that it is likely to suc-ceed on the merits, that there is a likelihood of irrepara-ble injury if injunctive relief is not granted, that a balance of hardships favors Plaintiff, and that an injunction will advance the public interest. ��e� �. �a�u�al Re�. �e�. Cou��el� �� U.S. �� 20 (2008). Plaintiff satisfies these criteria. In this case, Plaintiff has achieved "actual suc-cess on the merits" [*20] through the admission of lia-bility arising from Defendant's default. See U��e� S�a�e� �. �e�� 2011 U.S. ��. L��S 1222�� a� �20 (�.�. Cal. �c�. 20� 2011) (Plaintiff established actual success on the merits because Plaintiff was entitled to default judgment). Next, if an injunction were not granted, AAA would suffer irreparable injury from the ongoing damag-es to its reputation and goodwill. Furthermore, the bal-ance of hardships favors Plaintiff because an injunction will only proscribe Defendant's infringing activities. Fi-nally, an injunction is in the public interest because "[t]he public has an interest in avoiding confusion be-tween two companies' products." ��e��e� S�ec�al��e� �e�� c. �. ��llo�� o�g�o ��e��.� ��c.� �� .3� �8�� 3 �. � (�� C��. 200�). Defendant should therefore be restrained and enjoined from any and all use of the AAA Marks. Further, because the Court has found that



Plaintiff has established that Defendant willfully in-fringed Plaintiff's trademark, the Court rules that Plaintiff is entitled to impoundment and destruction pursuant to 1� U.S.C. § 1118.

CONCLUSION AND RECOMMENDATION

For the reasons set forth above, IT IS RECOM-MENDED that:

1. Plaintiff's [*21] Motion for Default Judgment (Doc. 22) against Defendant Oakhurst Lodge be GRANTED;

2. Plaintiff shall file a notice of vol-untary dismissal as to Defendant Cheta-nukmar Patel or a notice informing the Court that it intends to proceed to trial against Defendant Chetanukmar Patel within fifteen (15) days of this order.

3. Plaintiff is ordered to serve a copy of these Findings and Recommendations and the Order of Adoption on Defendant's within ten (10) days of the service of the Order Adopting Findings and Recom-mendations.

4. Defendant, their agents, servants, employees, attorneys, and all persons in active concert or participation with De-fendant are enjoined and restrained from engaging in any of the following acts:

(1) Using the designa-tion "AAA" or any other name or mark incorporat-ing Plaintiff's service marks, either alone or in combination with other words or symbols, in the marketing, sales, distribu-tion, promotion, advertis-ing, identification, or in any other manner in con-nection with any tourist accommodations and other related services at any lo-cality in the United States;

(2) Using the designa-tion "AAA" or any other name or mark incorporat-ing Plaintiff's service marks in any form or [*22] manner that would tend to identify or associ-ate Defendant's business or

services with Plaintiff in the marketing, sale, distri-bution, promotion, adver-tising, identification, or in any other manner in con-nection with any business;

(3) Referring to its businesses as "triple A ap-proved" (either orally or in writing) in the marketing, sale, distribution, promo-tion, advertising, identifi-cation, or in any other manner in connection with any business;

(4) Representing to anyone (either orally or in writing) that its business is affiliated with Plaintiff in any way or is an AAA agent or contractor unless its businesses are approved by Plaintiff to be an AAA agent or contractor;

(5) Defendant, pursuant to 1� U.S.C. § 1118, shall deliver to Plaintiff's attorney within thirty (30) days after service of the Order Adopting Findings and Recom-mendations, to be impounded or de-stroyed by Plaintiff, all literature, signs, labels, prints, packages, wrappers, con-tainers, advertising materials, stationery, and any other items in its possession or control that contain the infringing desig-nation "AAA" or any other name or mark incorporating Plaintiffs service marks, ei-ther alone or in combination with other [*23] words and symbols;

(6) Defendant is further ordered to remove from its business premises within thirty (30) days after service of the Order Adopting Findings and Recommenda-tions, all instances of the "AAA" designa-tion, and to destroy all molds, plates, masters, or means of creating the infring-ing items;

(7) Defendant is further ordered to instruct, within thirty (30) days after ser-vice of the Order Adopting Findings and Recommendations, any print directory, Internet directory, or website that it has



caused to carry the AAA mark, including, without limitation, any reference to the "AAA" designation or other infringing designation, to cease using such names at the earliest possible date;

(8) Within thirty (30) days after ser-vice of the Order Adopting Findings and Recommendations, Defendant is ordered to file with the Clerk of the Court and to serve Plaintiff, a report in writing, under oath, setting forth in detail the manner and form in which Defendants have complied with this injunction.

These findings and recommendations are submitted to the district judge assigned to this action, pursuant to Title 28 o� ��e U��e� S�a�e� Co�e �ec��o� 636(b)(1)(B)

and this Court's Local Rule 30�. Within [*24] ten (10) days of service of this recommendation, any party may file written objections to these findings and recommen-dations with the Court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." The district judge will review the magistrate judge's findings and recommendations pursuant to Title 28 o� ��e U��e� S�a�e� Co�e �ec��o� 636(b)(1)(C). The parties are advised that failure to file objections within the specified time may waive the right to appeal the district judge's order. �a��e� �. �l�� 1 �.2� 11�3 (�� C��. 1��1).

IT IS SO ORDERED.

Dated: December 18, 2012

�s� Barbara A. McA�liffe

UNITED STATES MAGISTRATE JUDGE


EXHIBIT “B”


ComUnity Collectors LLC, et al., Plaintiffs, v. Mortgage Electronic Registration Services, Inc., et al., Defendants. ComUnity Collectors LLC, et al., Plaintiffs, v. The

Bank of New York, et al., Defendants.

No. C-11-4777 EMC, RELATED TO No. C-12-0771 EMC

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

2012 U.S. Dist. LEXIS 110690

August 7, 2012, Decided August 7, 2012, Filed

COUNSEL: [*1] For ComUnity Collectors LLC, W. Darryl Fry, as an individual, Gwendolynn J. Tyler 2006 Living Trust (3:11-cv-04777-EMC), Plaintiffs: Edward K. White, III, LEAD ATTORNEY, Attorney at Law, Franklin, TN.

For Dewey & LeBoeuf L.L.P., Roxana Bargoz, Christo-pher DiAngelo (3:11-cv-04777-EMC), Defendants: Ste-ven Scott Davis, N/A, Gaims, Weil, West, Epstein, LLP, Los Angeles, CA.

For The Bank of New York Mellon (3:11-cv-04777-EMC), Defendant: Alison Ruth Kalinski, LEAD ATTORNEY, Palmer Lombardi Donohue, LA, CA.

For Wilmington Trust Company (3:11-cv-04777-EMC), Defendant: Alison Ruth Kalinski, Palmer Lombardi Donohue, LA, CA.

For Specialized Loan Servicing L.L.C. (3:11-cv-04777-EMC), Defendant: Alison Ruth Kalinski, Palmer Lombardi Donohue, LA, CA; Brett David Wat-son, Palmer Lombardi and Donohue LLP, Los Angeles, CA; Charles R. Jacob, III, PRO HAC VICE, Miller and Wrubel P.C., New York, NY; Claire Huene, Miller Wrubel P.C., New York, NY.

For Deutsche Bank AG (3:11-cv-04777-EMC), Defend-ant: Elizabeth Allen Frohlich, LEAD ATTORNEY,

Morgan, Lewis & Bockius, San Francisco, CA; Shawn M. Kennedy, Morgan Lewis & Bockius LLP, Irvine, CA.

For Oseberg Asset Management LLC (3:11-cv-04777-EMC), Defendant: Betty [*2] Malka Shumener, LEAD ATTORNEY, Henry H. Oh, Shu-mener, Odson & Oh LLP, Los Angeles, Ca; John Daniel Spurling, Shumener, Odson Oh LLP, Los Angeles, CA.

For ComUnity Collectors LLC, W. Darryl Fry, Gwen-dolynn J. Tyler 2006 Living Trust (3:12-cv-00771-EMC), Plaintiffs: Edward K. White, III, LEAD ATTORNEY, Attorney at Law, Franklin, TN.

For The Bank of New York Mellon (3:12-cv-00771-EMC), Defendant: Alison Ruth Kalinski, LEAD ATTORNEY, Palmer Lombardi Donohue, LA, CA; Charles R. Jacob, III, PRO HAC VICE, Miller and Wrubel P.C., New York, NY; Claire Huene, PRO HAC VICE, Miller Wrubel P.C., New York, NY.

For Wilmington Trust Company (3:12-cv-00771-EMC), Defendant: Charles R. Jacob, III, PRO HAC VICE, Mil-ler and Wrubel P.C., New York, NY; Claire Huene, PRO HAC VICE, Miller Wrubel P.C., New York, NY.

JUDGES: EDWARD M. CHEN, United States District Judge.

OPINION BY: EDWARD M. CHEN



OPINION

ORDER GRANTING DEFENDANT OSEBERG�S MOTION TO DISMISS FOR LAC� OF SUBJECT MATTER JURISDICTION

(Docket Nos. 55, 59, 62, 64, 66, 73, 111)

I.INTRODUCTION

Plaintiffs ComUnity Collectors LLC ("Collectors"), Gwendolynn J. Tyler 2006 Living Trust ("GTrust"), and Darryl Fry have filed suit against Defendants Mortgage Electronic Registration Services ("MERS"), [*3] Ter-win Advisors L.L.C. ("Terwin Advisors" or "Winter Group"), Dewey & LeBoeuf L.L.P. ("Dewey"), Christo-pher DiAngelo, Roxana Bargoz, The Bank of New York Mellon ("BNYM" or "Bank of New York"), Wilmington Trust Company ("Wilmington"), Specialized Loan Ser-vicing L.L.C. ("SLS"), Deutsche Bank AG, and Oseberg Asset Management LLC ("Oseberg"). Compl., Docket No. 1. Plaintiffs allege causes of action for fraud, breach of fiduciary duty, conspiracy, and breach of the bank-ruptcy automatic stay against Defendants, arising out of a disputed transaction between the parties to create a mortgage asset-backed security called the Terwin Micro Asset-Backed Security, Series 2007 ComUnity1 ("Secu-rity" or "Micro 1"). Compl. ¶ 2. Pending before the Court are Defendants' motions to dismiss.1

1 Multiple Defendants filed motions to dismiss in this action under various legal theories, in-cluding lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a claim upon which relief can be granted. See Docket Nos. 55, 59, 62, 64, 66, 73; see also ComUnity v.Bank of New York, C-12-771 EMC, Docket No. 8. Because the Court concludes that it lacks sub-ject matter jurisdiction over these [*4] actions, it is without power to consider Defendants' motions as to anyissue not incorporated into the above ju-risdictional analysis.

After considering the parties' submissions and oral argument, and for the reasons set forth below, the Court GRANTS Defendant Oseberg's motion to dismiss for lack of subject matter jurisdiction. Because the Court lacks jurisdiction, it may not exercise supplemental ju-risdiction to consider the merits of any additional mo-tions by Defendants concerning Plaintiffs' state law claims. Herman Family Revocable Trust v. Teddy Bear, 254 F.3d 802, 806 (9th Cir. 2001). In addition, because Plaintiff concedes that his second-filed related action, ComUnity v. Bank of New York, C12-771 EMC, is mere-ly a duplicate of the first-filed action, see No. 12-771 EMC, Docket No. 13, at 3, the Court DISMISSES that

action for lack of subject matter jurisdiction as well. Adams v. California Dept. of Health Services, 487 F.3d 684, 688 (9th Cir. 2007) ("[T]he district court may exer-cise its discretion to dismiss a duplicative later-filed ac-tion, to stay that action pending resolution of the previ-ously filed action, to enjoin the parties from proceeding with it, or to consolidate both [*5] actions.").

II. FACTUAL AND PROCEDURAL BAC�-GROUND

In the Complaint, Plaintiffs allege as follows. Plain-tiff Darryl Fry is a prepetition creditor for ComUnity Lending, Inc. ("CLI"), and CLI's sole shareholder. Compl. ¶ 1. CLI was a mortgage lender and bank, which was in the business of originating mortgage loans and then selling them to investors. Id. ¶¶ 14-15. CLI did not hold the mortgages and service them; rather, it funded and sold them. Id. ¶ 15. CLI declared bankruptcy on January 4, 2008. Id. ¶ 26. Plaintiff Collectors is the suc-cessor in interest to CLI pursuant to a bankruptcy trustee sale assigning CLI's interests related to the Micro 1 Se-curity. Id. ¶ 2. Plaintiff GTrust is a living trust which purchased a Class B-1 interest in the Micro 1 Security for $1.25 million. Id. ¶ 19.

In the fall of 2007, CLI began negotiations to create the Micro 1 Security with Terwin/Winter Group.2 Id. ¶ 18. The Security was to be offered to investors contain-ing 144 mortgages owned by CLI, and Winter Group was to have a repurchase option to buy the mortgages at a later date for 90% of their face value. Id. ¶¶ 18, 21. CLI contributed the mortgages in exchange for a Class B-2interest, Defendant Oseberg [*6] contributed $8.5 mil-lion for the senior Class A interest, and Plaintiff GTrust contributed $1.25 million for the mezzanine Class B-1interest. Id. ¶ 19. Oseberg and GTrust's contributions were to be used to pay off the debt on the CLI mortgages owed to other lenders. Id. The closing date was set for September 27, 2007. Id. ¶ 20.

2 Plaintiffs include SLS within the Winter Group, because they allege that SLS was a Win-ter Group entity. Compl. ¶¶ 11, 17.

CLI and GTrust contributed their signature pages, mortgages, and $1.25 million as of the closing date. Id.¶¶ 19-22. Defendant Oseberg also contributed its share of the money by the closing date. Id. ¶ 19. CLI, GTrust, and Oseberg received their certificates of security from the Dewey Team3 in exchange on September 28, 2008. Id. ¶ 40. GTrust received regular reports and payments for at least some period of time from BNYM, purportedly in its capacity as Administrator of the Micro 1 Security. Id. ¶¶ 42, 47, Ex. 1 (listing BNYM as Security Administrator); see also Docket No. 89, Ex. 6 (Trust Agreement) (listing



BNYM as Master Servicer, Backup Servicer, and Securi-ties Administrator).

3 Dewey Team refers to Dewey and the attor-ney-defendants in this [*7] action who were at-torneys at Dewey during the time in question, DiAngelo and Bargoz.

However, Plaintiffs allege that Micro 1 never closed and the contract never formed. Instead, Plaintiffs allege that after sending in their assets and signature pages, the Winter Group attempted to unilaterally modify the con-tract to provide for a repurchase price of 72.06%, instead of the agreed-upon 90%. Id. ¶ 22. The Winter Group further attempted to change the contract on December 26, 2007, to 27.94%. Id. The Dewey Team allegedly aided the Winter Group in these attempted unilateral changes by incorporating them into the contract docu-ments and attaching signature pages to those documents on January 22, 2008. Id. Plaintiffs construe these at-tempted changes as counteroffers, to which CLI and GTrust never assented. Id. Thus, Plaintiffs allege these attempted changes killed the contract formation process. Id.

Plaintiffs further allege that Defendants fraudulently conducted themselves as if the contract had formed, even though it had not. They allege that Defendants Winter Group and Dewey created a fraudulent closing date of January 22, 2008, on which they created false closing binders which attached signature [*8] pages to the al-tered contract and mis-represented that it had closed on September 27, 2007. Id. ¶¶ 22-23. They claim that all Defendants except MERS participated in this fraudulent closing date and received the fraudulent closing binders. Id. ¶¶ 28, 32. Each of these Defendants besides MERS has allegedly misrepresented to Plaintiffs that a contract had formed. Id. ¶ 41.

In April 2008, Defendants Winter Group and Dewey Team attempted to exercise their fraudulent repurchase price through the Winter Group's purported entity SLS. Id. ¶¶ 25, 28, 30. BNYM sent a Notice of Termination of the Trust on April 15, 2008, informing Plaintiffs that SLS would exercise the repurchase option on April 25, 2008. Id. ¶ 31, Ex. 1. CLI's bankruptcy counsel immedi-ately protested and sent an April 23, 2008 letter to De-fendants Dewey, BNYM, and SLS, with a Notice of Au-tomatic Stay pursuant to CLI's pending bankruptcy peti-tion. Id. Ex. 3. In the letter, CLI's counsel disputed the repurchase price and stated that CLI had never agreed to anything except a 90% price. Id. It stated that any changes were unilateral and unapproved by CLI. Id. at 1-2.

On April 24, 2008, the Trustee revoked the Notice of Termination. [*9] Id. Ex. 4. No repurchase option

was ever executed by any Defendant or other party. Id.¶¶ 35, 45 (describing repurchase as "attempted"). There-after, Plaintiffs allege that the Winter Group, MERS, the Dewey Team, and SLS worked together to liquidate and "waste" the mortgage assets via foreclosing on 132 of the 144 mortgages. Id. ¶¶ 35, 60-61. Because the contract never formed, according to Plaintiffs, those mortgages remained assets of CLI and the bankruptcy estate. Id. ¶ 57. In addition, BNYM has never returned GTrust's $1.25 million, even though it purportedly knows no con-tract has formed and even though GTrust has demanded its return. Id. ¶ 34.

As for the remaining Defendants, Defendant Wil-mington signed the Micro 1 contracts intending to be a trustee. Id. ¶ 48. Wilmington allegedly never informed CLI or GTrust that the contract never formed, and mis-managed their assets by failing to return them to the rightful owner. Id. Defendant Deutsche engaged in the same conduct and also signed the Micro 1 contracts in-tending to be a trustee. Id. ¶ 49. Defendant Oseberg failed to forward any assets it received pursuant to its participation in the fraudulent contract to CLI and GTrust. Id. ¶ [*10] 50.

Based on the above allegations, Plaintiffs assert claims for fraud, breach of fiduciary duty, willful viola-tion of the automatic stay under 11 U.S.C. � 362(k), and conspiracy. They seek a permanent injunction preventing Defendants from liquidating, distributing, or controlling CLI's mortgage assets and proceeds; an order compelling Defendants SLS, BNYM, MERS, and Oseberg to trans-fer any remaining mortgage assets and proceeds to Col-lectors; disgorgement of sums received from participat-ing in the Micro 1 Security; $10 million to Plaintiff Fry in damages for the loss of his company, CLI; $1.25 mil-lion to Plaintiff GTrust in damages for her payment into the Security; $17,776,852 to Plaintiff Collectors in lost mortgages; punitive damages; fees and costs. Id. ¶¶ 71-78. The Bankruptcy Trustee did not pursue any claim for violation of the automatic stay.

III. DISCUSSION

A. Automatic Stay - Defendant Dewey

Before addressing the parties' motions, the Court must first address Defendant Dewey's Notice of Auto-matic Stay. On June 4, 2012, Defendant Dewey filed a Notice of Commencement of Chapter 11 Case and Stay of Actions Pursuant to Section 362 of the Bankruptcy Code. Docket No. 103. As Dewey's [*11] Notice ex-plains, [HN1] under 11 U.S.C. � 362(a) the automatic stay "prevents all parties from, inter alia, commencing or continuing any pre-petition litigation, taking any action to obtain possession or control over property of the Debtor's estates, or taking any action to enforce or collect



a judgment." Docket No. 103 at 1. The Court issued an order asking the parties to brief whether, pursuant to the automatic stay, the Court had authority to enter an order adjudicating the parties' motions to dismiss. Docket No. 105.4

4 The Court declines to order any additional briefing as requested by Plaintiffs and therefore DENIES their motion for administrative relief. Mot. for Administrative Relief and for a New Briefing Order, Docket No. 111.

[HN2] The Ninth Circuit has established that a dis-trict court has jurisdiction to determine whether an au-tomatic stay applies to its proceedings. See �ockyer v. �irant Corp., 398 F.3d 1098, 1113 (9th Cir. 2005); see also Dominic�s Rest. of Dayton, Inc. v. �antia, 683 F.3d 757, 760 (6th Cir. 2012). Although an automatic stay broadly applies to "the commencement or continuation" of judicial proceedings, this Court must interpret 11 U.S.C. � 362(a) to ensure that its [*12] application will not "produce a result 'demonstrably at odds with the in-tention of its drafters.'" See Clark v. Capital Credit � Collection Services, Inc., 460 F.3d 1162, 1169 (9th Cir. 2006) (citing In re Been, 153 F.3d 1034, 1036 (9th Cir. 1998)). That intention has been defined as (1) protecting a debtor from his creditors and alleviating "the financial pressures that drove him into bankruptcy" and (2) pro-tecting creditors to ensure equitable payment of claims from a debtor. See Independent Union of Fli�ht Attend�ants v. �an American �orld Airways, Inc., 966 F.2d 457, 459 (9th Cir. 1992) ("IUFA").

In IUFA, for example, [HN3] the Ninth Circuit held that where no statutory purpose is served by applying an automatic stay pursuant to 11 U.S.C. � 362(a), a court may properly dismiss the underlying action. IUFA, 966 F.2d at 459 ("[T]he application or non-application of � 362(a) to the dismissal of an action pending against a debtor should be made consistent with the purpose of the statute."). Thus, in that case, the court determined it could properly dismiss the action based on mootness where IUFA had "withdrawn the grievance which it sought to compel Pan Am [the debtor] to arbitrate by this [*13] action." Id. at 458.

In Dean v. Trans �orld Airlines, Inc., 72 F.3d 754, 756�57 (9th Cir. 1995), [HN4] the Ninth Circuit clarified its holding in IUFA and found that dismissal does not violate an automatic stay only if "there was no conceiva-ble way" for the court's consideration of the motion to harm the debtor in the action. Importantly, the Deancourt limited IUFA's holding to cases in which not only the effect of considering the motion (e.�., dismissing an action against the debtor), but also the consideration of the motion, would not involve the merits of the underly-ing case. See id. at 756 ("[T]he IUFA exception must be

a narrow one that cannot apply where a decision to dis-miss requires a court to first decide any other issues pre-sented by or related to the underlying case."). Thus, "post-filing dismissal in favor of the bankrupt of an ac-tion that falls within the purview of the automatic stay violates the stay where the decision to dismiss first re-quires the court to consider other issues presented by or related to the underlying case. In other words, thinking about the issues violates the stay." Id. In Dean, the court found that a district court order considering a party's mo-tion to [*14] dismiss violated the automatic stay be-cause it "required the court to decide whether the law-of-the-case precluded finding TWA liable to Dean" and therefore would require the "court to first decide . . . issues presented by or related to the underlying case." Id.

In the instant case, while some of Defendants' mo-tions to dismiss would likely run afoul of the automatic stay, here Defendant Oseberg's motion to dismiss demonstrates that the Court lacks subject matter jurisdic-tion over this action because, inter alia, Plaintiffs lack standing to pursue claims under 11 U.S.C. � 362. Be-cause considering this motion does not implicate the un-derlying issues or merits of this action, the automatic stay does not apply. See Dean, 72 F.3d at 756�57 (mo-tion to dismiss that "merely asked the court to recognize that IUFA no longer wished to litigate . . . did not violate the automatic stay because, at the time of IUFA's motion, it was clear there was no conceivable way for the court's consideration of the motion to harm the bankrupt Pan Am."); see also �indley Contours, ��C v. AABB Fitness Holdin�s, Inc., 414 F. App�� 62, 63 (9th Cir. 2011)("[B]ecause we find that subject matter jurisdiction is lacking [*15] and do not reach the merits of Appellant's claims, we need not retain jurisdiction over Mr. Cooper pursuant to the automatic stay provision of � 362.") (cit-ing Dean, 72 F.3d at 756); �vans v. Anderson, C 09�5227 �H�, 2010 U.S. Dist. ��IS 4320, 2010 �� 118398, at �1 (N.D. Cal. �an. 7, 2010) ("[W]here the district court lacks jurisdiction over the action filed be-fore it the court is not without power to remand the ac-tion and the stay does not deprive it of that power.") (citing County of Cook v. �ellon Stuart Co., 812 F. Supp. 793, 798 n. 3 (N.D. Ill. 1992)); �T�� Investors, �.�. v. �uire, 286 F. Supp. 2d 561, 563�64 (D. �d. 2003) ("[D]ismissing or transferring the case on jurisdic-tional grounds does not constitute a prohibited 'continua-tion' of the action under � 362.") (collecting district court cases outside the Ninth Circuit).

B. Jurisdiction

First, Defendant Oseberg argues that this Court lacks jurisdiction over this action and requests dismissal under Federal Rule of Civil �rocedure 12(b)(1). Defendant argues that diversity jurisdiction is lacking and that the



Court lacks federal question jurisdiction over their only federal claim under the Bankruptcy Code because there is no private right of action outside [*16] of the Bank-ruptcy Court, and because Plaintiffs lack standing under the statute.

1. Legal Standard

[HN5] A motion to dismiss is proper under Rule 12(b)(1) when the Complaint fails to allege grounds for federal subject matter jurisdiction or a plaintiff lacks standing to bring a claim. �arren v. Fo� Family �orld�wide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003). Alt-hough the defendant may be the moving party on a 12(b)(1) motion, "plaintiff bears the burden of establish-ing federal subject matter jurisdiction." CAL. PRAC. GUIDE: FED. CIV. PROC. BEFORE TRIAL, ¶ 9:77.10 (The Rutter Group 2011) (hereinafter "Rutter"). "Be-cause standing and ripeness pertain to federal courts' subject matter jurisdiction, they are properly raised in a [Federal] Rule [of Civil Procedure] 12(b)(1) motion to dismiss." Chandler v. State Farm �ut. Auto. Ins. Co., 598 F.3d 1115, 1121�22 (9th Cir. 2010).

2. Diversity Jurisdiction

Defendant Oseberg argues that there is no diversity jurisdiction because Plaintiffs and Defendant Dewey are both citizens of California. Docket No. 59 at 7; Schnabel v. �ui, 302 F.3d 1023, 1030 (9th Cir. 2002) ("[A] part-nership is a citizen of every state of which its partners are citizens.") (citing [*17] Carden v. Arkoma Assocs., 494 U.S. 185, 195, 110 S. Ct. 1015, 108 �. �d. 2d 157 (1990)). Plaintiffs do not respond to these arguments, and do not contest the assertion that diversity jurisdiction is not present. Therefore, the Court cannot rely on diver-sity jurisdiction.

�. Federal �uestion Jurisdiction

The only basis for federal question jurisdiction is Plaintiffs' claim that Defendants violated the automatic stay imposed by CLI's bankruptcy proceeding. 11 U.S.C. � 362(k) ("[A]n individual injured by any willful viola-tion of a stay provided by this section shall recover actu-al damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damag-es."). Defendants raise a number of challenges to this claim: (1) the need for Plaintiffs to bring the claim in bankruptcy court rather than federal district court; (2) lack of standing; and (3) failure to state a claim. Pursuant to Dean, this Court may not consider the third argument as to Plaintiffs' failure to state a claim under � 362 be-cause to do so would "require[] the court to first consider other issues presented by or related to the underlying case," including whether a contract formed between the parties, including Defendant Dewey.5 Dean, 72 F.3d at

755; [*18] see also �ewis v. Russell, CI�.S�03�2646�BS��, 2009 U.S. Dist. ��IS 41539, 2009 �� 1260290, at �2 (�.D. Cal. �ay 7, 2009) (stay-ing action as against all defendants where "[b]ecause of the nature of the claims . . . it is not possible to draw a meaningful distinction between claims asserted against the Suhs and all other claims"). However, Defendant's first two arguments are sufficient to convince the Court that it lacks subject matter jurisdiction.

5 Although Dewey had argued in its motion to dismiss that Plaintiffs did not assert their auto-matic stay claim against Dewey, see Docket No. 66 at 1 n.3, Plaintiffs' opposition makes it clear that they intended to assert said claim against Dewey, see Docket No. 85 at 11. Thus, consider-ing whether Plaintiffs have failed to state a claim under � 362 would implicate facts and claims re-lated to Dewey.

a. Ability to Bring Claim in Federal District Court

First, Defendants argue in the alternative that this claim cannot be brought outside of bankruptcy court. Specifically, Defendant Oseberg argues that there is no private right of action outside the bankruptcy court to pursue a claim for violation of the automatic stay. One district court has held, [HN6] "While � 362(h)6 arguably [*19] creates private right of action for willful violation of automatic stay, [citation], 11 U.S.C. �� 362 does not create a private cause of action outside of the Bankruptcy Court for violations of automatic stay. [Citation].") (cit-ing �ettitt v. Baker, 876 F.2d 456 (5th Cir.1989); Dash�ner v. Cate, 65 B.R. 492 (N.D. Iowa. 1986)). Scott v. �ells Far�o Home �ort�. Inc., 326 F. Supp. 2d 709, 719 (�.D. �a. 2003) aff�d sub nom. Scott v. �ells Far�o � Co., 67 F. App�� 238 (4th Cir. 2003). The Ninth Circuit similarly held in �SR ��ploration, �td. v. �eridian �il, Inc. that a plaintiff's state law claims for violation of the automatic stay were entirely preempted by the Bank-ruptcy Code and were thus federal claims, but that such claims must be brought in the bankruptcy court. 74 F.3d 910, 916 (9th Cir. 1996). The court noted, "MSR's mali-cious prosecution action against the Producers is com-pletely preempted by the structure and purpose of the Bankruptcy Code. Therefore, MSR's purported action must, in fact, be a federal claim. That claim, however, should have been brought in the bankruptcy court itself, and not as a separate action in the district court. Thus, the district court properly determined [*20] that it lacked �urisdiction to hear the matter." Id. (emphasis added). See �. ��uip. � Services Corp. v. Factory �oint Nat. Bank, Bennin�ton, 236 F.3d 117, 121 (2d Cir. 2001)("[Plaintiffs] assert that it also stated a federal claim un-der 11 U.S.C. � 362(h), which allows for the recovery of compensatory and punitive damages for willful viola-



tions of the automatic stay. However, again, such a claim must be brought in the bankruptcy court, rather than in the district court, which only has appellate jurisdiction over bankruptcy cases.") (emphasis in original) (citing In re Crysen��ontenay �ner�y Co., 902 F.2d 1098, 1104 (2d Cir.1990); �SR ��ploration, 74 F.3d at 916).

6 Section 362(k) was formerly � 362(h). Therefore, a number of cases cited below refer to 362(h), but the substantive provision is the same as that at issue in the instant case.

However, the Seventh and Eleventh Circuits have held that the issue is not one of subject matter jurisdic-tion, because Congress expressly granted district courts jurisdiction over bankruptcy matters pursuant to 28 U.S.C. � 1334. See �ustice Cometh, �td. v. �ambert, 426 F.3d 1342, 1343 (11th Cir. 2005) ("Unquestionably, the district courts may 'provide [*21] that any or all cases under title 11 and any or all proceedings arising under title 11' be referred to the bankruptcy court for that dis-trict. 28 U.S.C. � 157(a). However, the explicit � 1334grant of original jurisdiction over Title 11 cases clearly forecloses a conclusion that the district court lacked sub-ject matter jurisdiction over this case.") (citing �rice v. Rochford, 947 F.2d 829, 832 n.1 (7th Cir. 1991)).

Regardless of whether �SR ��ploration can be read to constrain this Court's jurisdiction, this District's local rules and other out-of-circuit authority establish that the proper course of action would be to refer this matter to the bankruptcy court. See Northern District General Or-der No. 24 ("This court hereby refers to the bankruptcy judges of this district all cases under title 11, and all proceedings arising under title 11 or arising in or related to cases under title 11."); �rice v. Rochford, 947 F.2d 829, 832 n.1 (7th Cir. 1991) (noting that while the dis-trict court had jurisdiction, the matter "should probably have been referred to the bankruptcy court under" the court's local rules). [HN7] The court has authority to grant permissive (or in some cases, mandatory) with-drawal [*22] of a reference to the bankruptcy court, but such withdrawal is typically more suited to cases in which federal questions have been presented that are distinct from bankruptcy issues. See 28 U.S.C.A. � 157(d) (providing that the district court can withdraw a case "for cause shown," and must withdraw a case "if the court determines that resolution of the proceeding re-quires consideration of both title 11 and other laws of the United States regulating organizations or activities af-fecting interstate commerce"); see also In re Tamalpais Bancorp, 451 B.R. 6, 10 (N.D. Cal. 2011) ("In determin-ing whether cause exists, a district court should consider the efficient use of judicial resources, delay and costs to the parties, uniformity of bankruptcy administration, the prevention of forum shopping, and other related fac-

tors.") (citing Sec. Farms v. Int�l Bhd. of Teamsters, Chauffers, �arehousemen � Helpers, 124 F.3d 999, 1008 (9th Cir.1997).

In this case, were the litigation to continue, the Court would refer the matter to the bankruptcy court in line with this District's local rules. However, because, as discussed below, Plaintiffs lack standing to pursue this claim in any court, thus depriving [*23] this Court of Article III jurisdiction, the Court proceeds to consider this issue.

b. Standing

Defendants argue that Plaintiffs lack standing to pursue any claims under � 362(k) for violations of the automatic stay. With respect to Plaintiffs Collectors and GTrust, Ninth Circuit authority clearly forecloses them from asserting claims under � 362(k) because they are artificial entities, rather than individuals. In In re �ood�man, [HN8] the Ninth Circuit held that only "natural, or individual, debtors" are eligible for relief under � 362(k), "not a corporation or other artificial entity." 991 F.2d 613, 619�20 (9th Cir. 1993). Because the plaintiff at is-sue in that case was a corporate creditor, the Ninth Cir-cuit held that he lacked standing. Similarly, to the extent Plaintiffs attempt to bring this claim on behalf of CLI as debtor, rather than as creditors, they would still lack standing because CLI is a corporate entity and therefore could not assign an interest it does not have.7 Defendants do not present any authority to the contrary. Thus, the only Plaintiff potentially eligible to assert a claim under � 362(k) is Plaintiff Fry, who is a prepetition creditor of CLI.

7 Nor could Plaintiffs assert [*24] standing through any purported assigned interest of the trustee, because while the trustee has authority to enforce the automatic stay under other provisions of the Code, the trustee has no private right of ac-tion for damages specifically under � 362(k). See In re Dyer, 322 F.3d 1178, 1190 (9th Cir. 2003)("Congress chose to exclude the Trustee from the reach of � 362�(k)�. The Trustee therefore has no private right of action for damages resulting from automatic stay violations.").

With respect to Plaintiff Fry, [HN9] the Ninth Cir-cuit has held that creditors lack standing to appeal auto-matic stay claims abandoned by the trustee. In In re �e�can �roves of Ari�ona, 951 F.2d 242, 245 (9th Cir. 1991), the court reasoned, "Allowing unsecured creditors to pursue claims the trustee abandons could subvert the trustee's powers. . . . We therefore hold that a creditor has no independent standing to appeal an adverse decision regarding a violation of the automatic stay." In light of �ecan �roves, a bankruptcy court has noted, [HN10]



"The Ninth Circuit has held that Section 362 is for the benefit of the debtor or the trustee. Thus, when the trus-tee fails to pursue enforcement of the automatic stay, no other [*25] party, including creditors, may challenge conduct or acts which violate the automatic stay." In re Soll, 181 B.R. 433, 443 (Bankr. D. Ari�. 1995), citing �ecan �roves, 951 F.2d at 245. See In re �opp, 323 B.R. 260, 267 (B.A.�. 9th Cir. 2005) ("[�ecan �roves] rules that creditors have no standing to object to a violation of an automatic stay, because the automatic stay 'is intended solely to benefit the debtor estate.'"). As the Bankruptcy Trustee has not pursued a claim for violation of the stay, �ecan �roves precludes Plaintiff Fry from prosecuting such a claim.

To be sure, a contrary view has been suggested in other Ninth Circuit cases. In �oodman, the Ninth Circuit commented - without citation to authority - that individ-ual creditors, but not corporate entities, could pursue claims under � 362. 991 F.2d at 618�19. However, be-cause the plaintiff at issue in �oodman was a corporate creditor and therefore lacked standing, the Court's state-ment was not part of or crucial to its holding. See id.("Normally pre-petition creditors in Johnston's position shall recover damages under 11 U.S.C. �� 362(h) [now 362(k)] and 1109(b) for willful violations of the auto-matic stay. Johnston, however, [*26] is a corporate en-tity."). Another more recent Ninth Circuit opinion re-peated the statement from �oodman, but again outside the scope of its holding. See In re Dawson, 390 F.3d 1139, 1146 (9th Cir. 2004) ("[I]f a willful violation of the automatic stay damages some portion of the bank-ruptcy estate, both the debtor and an individual creditor of the now less-valuable estate may recover actual dam-ages.") (making this statement in the rule section of an opinion that discussed only a debtor's claim for viola-tions of the automatic stay) (citing �oodman, 991 F.2d at 618). Neither �oodman nor Dawson cite to �ecan �roves. Their dicta is not binding.

Some bankruptcy courts have also reached a contra-ry result. One court has attempted to distinguished �ecan �roves on the basis that the �ecan �roves Trustee had abandoned the claim (as opposed to simply not bringing a claim in the first place) and that �ecan �roves in-volved a Chapter 7 bankruptcy as opposed to Chapter 11. See In re Int�l Fore� of California, Inc., 247 B.R. 284, 291 (Bankr. S.D. Cal. 2000) ("[T]his Court reads In re �ecan �roves to stand only for what it held - that where a chapter 7 trustee opts not to appeal an adverse ruling on [*27] an alleged stay violation, intervening creditors may not do so. . . . [T]his Court finds that these Creditors have standing to pursue the alleged stay violation under � 362(h)."). See In re �esick, 03�00038, 2006 Bankr. ��IS 1571, 2006 �� 2083655, at �5 (Bankr. D.D.C. �uly 19, 2006) ("[Plaintiff] has standing to seek to obtain a

declaratory judgment that the defendants' actions taken in alleged violation of the automatic stay are void."). The Court finds this authority unpersuasive.

[HN11] This Court concludes �ecan �roves is con-trolling on the issue. �ecan �roves contains unequivocal language disapproving of creditors challenging automatic stay violations. The only difference between it and this case is that �ecan �roves concerned an appeal, rather than an initial action. However, such a distinction is largely irrelevant in light of the Ninth Circuit's rationale in �ecan �roves that it would "subvert the trustee's powers" to "[a]llow[] unsecured creditors to pursue claims the trustee abandons." �ecan �roves, 951 F.2d at 245. Indeed, the court's rationale in explaining its ruling is broad, as it states,

In previous cases, we have reserved the question of whether a creditor can attack violations of the automatic stay. [*28] �ames v. �ashin�ton �ut. Sav. Bank (In re Brooks), 871 F.2d 89, 90 n. 1 (9th Cir.1989); �a�noni v. �lobe Inv. and �oan Co. (In re �lobe Inv. and �oan Co.), 867 F.2d 556, 559 (9th Cir. 1989). While there is no precedent on point in the Ninth Circuit, the majority of jurisdictions which have considered standing under the automatic stay provision, 11 U.S.C. �362, have concluded that section 362 is in-tended solely to benefit the debtor estate. See In re �lobe, 867 F.2d at 559 � n. 6(citing cases). Language from many cases indicates that, if the trustee does not seek to enforce the protections of the automatic stay, no other party may challenge acts purportedly in violation of the automatic stay. �ashin�ton �ut. Sav. Bank v. �ames (In re Brooks), 79 B.R. 479, 481 (Bankr. 9th Cir.1987), aff�d on other �rounds 871 F.2d 89 (9th Cir.1989); Bryce v. Stivers (In re Stivers), 31 B.R. 735, 735 (Bankr.N.D.Cal.1983); Hadsell v. �hila�delphia �ife Ins. Co. (In re Fuel �il Sup�ply and Terminalin�, Inc.), 30 B.R. 360, 362 (Bankr.N.D.Te�.1983).

Id. Thus, the �ecan �roves court did not rest its holding on the fact that the case involved an appeal. In addition, unlike in Fore�, which attempted to distinguish [*29] �ecan �roves, this is a Chapter 7 case just like in �ecan �roves.

Accordingly, the Court concludes that Plaintiffs lack standing to bring their � 362(k) claim.



I�. CONCLUSION

For the foregoing reasons, the Court GRANTS De-fendant's motion to dismiss Plaintiffs' claim under � 362(k) claim for lack of subject matter jurisdiction. Be-cause the Court has dismissed Plaintiffs' only federal claim on jurisdictional grounds under 12(b)(1), it has no discretion to exercise supplemental jurisdiction over any of Plaintiffs' state law claims because "dismissal postu-lates that there was never a valid federal claim. Exercise of jurisdiction . . . would therefore violate Article III of the Constitution . . ." Herman Family Revocable Trust v. Teddy Bear, 254 F.3d 802, 806 (9th Cir. 2001) (quoting United �ine �orkers v. �ibbs, 383 U.S. 715, 725, 86 S. Ct. 1130, 16 �. �d. 2d 218 (1966)); see also Skysi�n Int�l, Inc. v. City � County of Honolulu, 276 F.3d 1109, 1118 n.7 (9th Cir. 2002) ("[H]ad Skysign lacked standing to bring its federal claim, the district court would have

lacked subject matter jurisdiction over that claim and accordingly would have had no discretion to hear the state law claims.") (citing Herman); �herini v. �a�o�marsino, 258 F. App�� 81, 83�84 (9th Cir. 2007) [*30] (citing Skysi�n in the context of statutory standing) (un-published). Accordingly, the Court DISMISSES Plain-tiffs' remaining claims under state law without prejudice. The Clerk is directed to close the file.

This Order disposes of Docket Nos. 55, 59, 62, 64, 66, 73, 111.

IT IS SO ORDERED.

Dated: August 7, 2012

/s/ Edward M. Chen

EDWARD M. CHEN

United States District Judge


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