Case 2:12-cv SJO-E Document 36 Filed 01/07/13 Page 1 of 19 Page ID #:900

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1 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #:00 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA VENABLE LLP Richard J. Frey (SBN 0) Tamany Vinson Bentz (SBN 00) Melissa C. McLaughlin (SBN ) rjfrey@venable.com tjbentz@venable.com mcmclaughlin@venable.com 0 Century Park East, Suite 0 Los Angeles, CA 00 Telephone: () -00 Facsimile: () -0 VENABLE LLP Marcella Ballard (Pro Hac Vice Application Forthcoming) mballard@venable.com 0 Avenue of the Americas, th Floor New York, NY 00 Telephone: () 0-00 Facsimile: () 0- Attorneys for Plaintiff Playboy Enterprises International, Inc. UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA PLAYBOY ENTERPRISES INTERNATIONAL, INC., a Delaware corporation, WESTERN DIVISION Plaintiff, PLAY BEVERAGES, LLC, a Delaware limited liability company; CIRTRAN BEVERAGE CORPORATION, a Utah corporation; and CIRTRAN CORPORATION, a Nevada corporation, v. Defendants. CASE NO. CV-0 SJO (Ex) Hon. S. James Otero Courtroom PLAINTIFF S OPPOSITION TO DEFENDANTS MOTION TO DISMISS PLAINTIFF S COMPLAINT, OR IN THE ALTERNATIVE, TO STAY ACTION Date: January, 0 Time: :00 a.m. Action Filed: December, 0 Trial Date: None set 0-v

2 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #:0 TABLE OF CONTENTS Page 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA I. INTRODUCTION... II. STATEMENT OF FACTS... III. LEGAL ARGUMENT... A. CirTran Corporation is Properly Included as a Defendant... B. The First-to-File Rule Does Not Apply Here.... The First-to-File Rule Only Applies Between Two Federal Courts.... Even if the First-to-File Rule Could be Applied, the Two Actions Are Not Similar... C. Venue is Proper in This District.... The Forum Selection Clause Does Not Apply Because This Action Does Not Interpret the License Agreement.... Even if the Venue Selection Clause Applied, it Allows Playboy to File in California... IV. CONCLUSION... i 0-v

3 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #:0 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA ILLINOIS STATE CASES TABLE OF AUTHORITIES Page(s) Corcoran-Hakala v. Dowd,, Ill. App. d (00).... FEDERAL CASES Alakozai v. Chase Inv. Services Corp., No. CV 0 SJO (JEMx), 0 WL, at * (C.D. Cal. Mar., 0)... Alltrade, Inc. v. Uniweld Products, Inc., F.d (th Cir. )...., AmSouth Bank v. Dale, F.d (th Cir. 00).... Colorado River Water Conservation Dist. v. U. S., U.S. 00, S. Ct. ()... Cosgrove v. Bartolotta, 0 F.d (th Cir. ).... Exxon Mobil Corp. v. Saudi Basic Indus. Corp., U.S. 0, S. Ct. (00)... Johnson v. Columbia Properties Anchorage, LP, F.d (th Cir. 00).... Just Film, Inc. v. Merchant Services, Inc., No. C CW, 0 WL (N.D. Cal. Jan., 0)... Manetti-Farrow, Inc. v. Gucci Am., Inc., F.d 0 (th Cir. ).... Multimin USA, Inc. v. Walco Internation, Inc., CV F 0-0 AWI SMS, 00 U.S. Dist. LEXIS (E.D. Cal. Apr., 00)...., Pacesetter Sys., Inc. v. Medtronic, Inc., F.d (th Cir. )...., PETA, Inc. v. Beyond the Frame, Ltd., CV -0 MMM SSX, 0 WL (C.D. Cal. Feb., 0)... Pfizer Inc. v. Apotex Inc., 0 F. Supp. d 0 (N.D. Ill. 00).... Water, Inc. v. Everpure, Inc., CV 0- ABC (SSx), 00 U.S. Dist. LEXIS (C.D. Cal. Aug., 00)... ii 0-v

4 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #:0 V ENABLE LLP 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA I. INTRODUCTION After the license agreement between Playboy and PlayBev expired on its terms (the License Agreement or Agreement ), Defendants continue to use the Playboy Marks when they have no authorization to do so. Defendants infringement of the well-known and valuable Marks is flagrant, and their ongoing effort to profit from Playboy s goodwill is preventing Playboy from exercising control over its Marks and its reputation. In an effort to avoid this action and Playboy s pending Motion for Preliminary Injunction, Defendants rely on the following venue-related arguments in their Motion to Dismiss: CirTran Corporation was improperly named in this action because it does not have any contracts with Playboy and is not involved with Playboy Energy Drink. This action should be dismissed or stayed under the first-to-file rule because Defendants had filed their own action against Playboy and other parties filed in Illinois state court. The forum selection clause in the License Agreement applies to this action such that any lawsuit between the parties must be filed in Cook County, Illinois. All of these arguments fail. First, CirTran Corporation is appropriately named in this action. CirTran Playboy notes that Defendants filed their motion on the same day the parties completed the Local Rule - conference. While counsel for both parties began the meet and confer process on December th, the meet and confer continued and counsel s final discussion took place on December th, just hours before Defendants filed their motion. In Playboy s view, Defendants did not comply with the letter or spirit of Rule -. The timing of the motion indicates that it is unlikely Defendants gave any real consideration to the arguments raised by Playboy in that meeting. 0-v

5 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #:0 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA blatantly uses the Playboy Marks on its website and its public filings state that it makes the majority of its revenue from CBC s sales of Playboy Energy Drink. It is a waste of the parties (and this Court s) time to argue that they were improperly included in this action. Second, the first-to-file rule does not require that Playboy file this action in Illinois state court. The rule is not applicable here because it only applies if both actions are pending in federal courts. Defendants action is pending in Illinois state court (the Illinois Complaint or Illinois Action ). Thus, the rule does not apply to this case. The first-to-file rule also should not apply here because the two actions are not substantially similar. The claims in the Illinois Action are based on conduct alleged to have taken place during the term of the License Agreement, while the claims here are based on conduct taking place after the expiration of the License Agreement. The claims and issues in the two actions are different, as the Illinois Action alleges multiple breach of contract and tortious interference claims, and Playboy alleges several Lanham Act claims in this action. Playboy is not seeking damages for any breach of contract or tort claims in this action, only injunctive relief. And although Playboy had the option of bringing its Lanham Act claims as permissive counterclaims in the Illinois Action, it is not required to do so, as Illinois does not have mandatory counterclaims. Third, the venue selection clause in the License Agreement is not applicable here because Playboy s claims in this action do not involve the Agreement. All of Playboy s claims are based on conduct following the expiration of the Agreement. But even assuming arguendo that the venue selection clause were to apply, Playboy has complied with the express terms of the provision by filing its action in PlayBev s domicile (i.e., in California). There is no reason for this Court to dismiss the complaint or stay the action. 0-v

6 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #:0 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA II. 0-v STATEMENT OF FACTS In 00, Playboy entered into a License Agreement with PlayBev under which PlayBev had the limited right to manufacture and sell certain non-alcoholic beverages, including Playboy-branded energy drinks. (Compl. 0). PlayBev is a limited liability company, and Defendants have not disputed Playboy s allegation that one of PlayBev s members is domiciled in California. (See id. ). PlayBev granted manufacturing and distribution rights under the Agreement to CBC. (Id. ). The License Agreement contained a five-year term that would expire on March, 0 unless terminated. The Agreement could be renewed if PlayBev was in full compliance with all terms of the Agreement and other specific conditions were met. (See Dkt., Benevento Decl., Ex. F-, [License Agreement]). Based on, inter alia, PlayBev s failure to meet its obligations under the Agreement and consistent failure to timely make its required payments to Playboy, Playboy sought to terminate the Agreement in May 0. (See Request for Judicial Notice in Support of Opposition to Motion to Dismiss [ RJN ], Ex. A [Memorandum in Support of Motion to Terminate Automatic Stay]) (explaining reasons for termination). However, Playboy was unable to do so because, unbeknownst to Playboy and prior to its issuance of a termination notice, an involuntary petition for Chapter bankruptcy had been filed against PlayBev by several of its creditors. (See Dkt., RJN in Support of Motion for Preliminary Injunction, Ex. A [Chapter Involuntary Petition]). Later in 0, while bankruptcy was still pending, PlayBev initiated an adversary proceeding against Playboy alleging breach of the License Agreement and tortious interference, and Playboy answered and counterclaimed to the adversary proceeding. (Defendants Motion to Dismiss [ MTD ] at p. :-). Because both PlayBev and Playboy asserted claims for breach of the License Agreement, Playboy objected to venue in the Utah Bankruptcy Court and

7 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #:0 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA contended that such contract-based claims should be filed in Cook County, Illinois, pursuant to the License Agreement s venue selection clause. (See id. at p. :0- ). Subsequently, the parties entered into a Standstill Agreement under which the adversary proceeding would be dismissed, the parties would work to negotiate a business resolution, and re-filing of the claims asserted in the adversary proceeding was prohibited unless one of several conditions occurred. (See Dkt., Benevento Decl., Ex. E [Standstill Agreement]). Because of the approaching expiration of the License Agreement on March, 0 and in light of the parties settlement negotiations, the parties entered into two written agreements that briefly extended the expiration date of the License Agreement, and PlayBev sought and obtained the Bankruptcy Court s approval of the two extension agreements. (See Dkt., RJN in Support of Motion for Preliminary Injunction, Exs. C-F [Extension Agreements and Orders Approving Extension Agreements]). The second and final extension agreement (the Second Extension Agreement ) set forth three alternative expirations for the License Agreement. (Id. Ex. E- [Second Extension Agreement]). First, it specified that the Agreement would expire on September 0, 0. (Id.). Second, it provided if PlayBev obtained an order confirming its Chapter plan of reorganization by September 0, 0, an alternative expiration for the Agreement would be the earlier of October 0, 0 or the last day before a new license agreement became effective. (Id.). Third, it provided that the Agreement would terminate automatically if PlayBev s proposed reorganized debtor did not make a mandatory $ million None of the predicate conditions has occurred, such that PlayBev is still subject to the claims bar arising from the Standstill Agreement and subsequent Bankruptcy Court order. Playboy has filed a motion to dismiss the claims asserted in the Illinois Action based on the parties Standstill Agreement and the Bankruptcy Court s order. Hearing on Playboy s motion is set for February, 0. (See RJN, Ex. B). 0-v

8 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #:0 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA payment into escrow for the benefit of Playboy within 0 days of signature of a new license agreement (which was later signed on August, 0). (Id.) 0-v All of the expiration dates in the Second Extension Agreement have passed. (See Dkt., Coffelt Decl. in Support of Motion for Preliminary Injunction - ). And the new license agreement did not take effect because PlayBev failed to meet certain conditions precedent: confirmation of a Chapter plan, and the $ million escrow payment. (See Dkt., Coffelt Decl. in Support of Playboy s Reply - & Ex. A--, A- [New License Agreement]; Dkt., Hawatmeh Decl. in Support of Dfts. Opposition to Motion for Preliminary Injunction ). Playboy has informed PlayBev that the License Agreement has expired and that PlayBev has no continuing rights to use the Marks. (See Dkt., Coffelt Decl. in Support of Playboy s Reply ; Dkt., Hawatmeh Decl. in Support of Dfts. Opposition to Motion for Preliminary Injunction ). PlayBev canceled its hearing to confirm its plan of reorganization. (Dkt., RJN in Support of Motion for Preliminary Injunction, Ex. G [Notice of Cancellation of Plan Confirmation Hearing]). Shortly thereafter, the U.S. Trustee filed a motion to convert the case to a Chapter liquidation or to dismiss PlayBev s voluntary Chapter proceeding. (RJN, Ex. C [Motion to Dismiss or to Convert Case]). Around the same time, PlayBev and CBC filed the Illinois Complaint against Playboy and other defendants in the Circuit Court of Cook County, Illinois, which has since been amended. (See MTD at p. :-; Dkt., Benevento Decl., Ex. A [Illinois Action Amended Complaint]). The Illinois Complaint alleges sixteen breach of contract and tortious interference-type claims relating to the parties alleged conduct during the term of the License Agreement. (See Dkt., Benevento Decl., Ex. A-- [Illinois Action Amended Complaint]). PlayBev s bankruptcy case was dismissed and the automatic stay lifted on December, 0. (Dkt., RJN in Support of Motion for Preliminary Injunction,

9 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #:0 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA Ex. H [Order Dismissing Case]). Playboy filed this action and Motion for Preliminary Injunction just a few days later in order to stop Defendants ongoing trademark infringement. (See Dkt., [Complaint; Motion for Preliminary Injunction]). In contrast with the Illinois Action, Playboy s Complaint here alleges solely Lanham Act claims based on Defendants unauthorized use of Playboy s trademarks since the expiration of the License Agreement. (See Compl.). Playboy does not seek to recover in this action for Defendants prior breach of the expired License Agreement or Defendants tortious conduct prior to the Agreement s expiration. III. 0-v LEGAL ARGUMENT A. CirTran Corporation is Properly Included as a Defendant Defendants argument that CirTran Corporation was improperly named in this lawsuit can be quickly dismissed. Defendants claim that just because CirTran does not have a contract with Playboy and is not involved in manufacturing, distributing, or marketing Playboy Energy Drink, that it does not belong in this lawsuit. (MTD at p. n. ). This (like much of Defendants Motion) misses the point of Playboy s lawsuit, which is that Defendants are committing trademark infringement through their unauthorized use of the Playboy Marks. The Complaint very clearly alleges that CirTran has engaged in trademark infringement and false advertising under the Lanham Act. Playboy alleges that CirTran owns the domain name that the Playboy Marks are used on that website, and that Defendants do not have authorization to use the Playboy Marks. (See Compl.,, 0). CirTran s unauthorized use of the Playboy Marks on its website (which, incidentally, does advertise and promote Playboy Energy Drink (see id. 0)) constitutes trademark infringement. Playboy further alleges that the statements that PlayBev is an official licensee of Playboy and that its use of the Playboy Marks is under license, are literally false or misleading. (Id. ). Those statements are alleged to be made

10 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #:0 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA on the CirTran-owned website, (Id., ). CirTran s false or misleading statements on its website constitute false advertising. CirTran belongs in this lawsuit as much as PlayBev and CBC. B. The First-to-File Rule Does Not Apply Here. The First-to-File Rule Only Applies Between Two Federal Courts In their first-to-file argument, Defendants omit one crucial requirement: the rule can only be applied when both actions are pending in federal courts. See Alltrade, Inc. v. Uniweld Products, Inc., F.d, (th Cir. ) (firstto-file rule allows a district court to transfer, stay, or dismiss an action when a similar complaint has already been filed in another federal court ); Pacesetter Sys., Inc. v. Medtronic, Inc., F.d, - (th Cir. ) ( There is a generally recognized doctrine of federal comity which permits a district court to decline jurisdiction over an action when a complaint involving the same parties and issues has already been filed in another district. ); PETA, Inc. v. Beyond the Frame, Ltd., CV -0 MMM SSX, 0 WL, at * (C.D. Cal. Feb., 0) ( The first-to-file rule is a principle of federal comity that permits a district court to decline jurisdiction over an action when a complaint involving the same parties and issues has already been filed in another district. ); Pfizer Inc. v. Apotex Inc., 0 F. Supp. d 0, 0 (N.D. Ill. 00) ( Courts in this district have recognized that when two related cases are pending in separate federal courts, either of those courts may exercise that inherent power to stay the proceedings before it in deference to the related action. ). None of the cases cited in Transfer of the second-filed action is one option available to a district court when applying the first-to-file rule. Since a federal court cannot transfer an action to a state court, a transfer under the first-to-file rule could only be accomplished if the first court is also a federal court. See Just Film, Inc. v. Merchant Services, Inc., No. C CW, 0 WL, at * (N.D. Cal. Jan., 0). 0-v

11 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #: 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA Defendants motion applies the first-to-file rule to a federal and state court case. 0-v It is not uncommon for overlapping claims or issues to proceed at the same time in state and federal courts. Indeed, the United States Supreme Court has repeatedly held that the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction. Exxon Mobil Corp. v. Saudi Basic Indus. Corp., U.S. 0,, S. Ct., - (00); see also Just Film, Inc., 0 WL, at * ( The general rule regarding concurrent, duplicative litigation in state and federal court is that [e]ach court is free to proceed in its own way and in its own time, without reference to the proceedings in the other court, and that whichever court rules first will, via the doctrines of res judicata and collateral estoppel, preclude the other from deciding that claim or issue. ) (citations omitted). A federal court cannot and should not abstain from jurisdiction simply because an overlapping claim or issue is being litigated in a state court, as there is a virtually unflagging obligation of the federal courts to exercise the jurisdiction given them. Colorado River Water Conservation Dist. v. U. S., U.S. 00,, S. Ct., (). Defendants arguments that judicial economy will be served and Playboy will not be prejudiced by a stay or dismissal are irrelevant this Court cannot apply the first-to-file rule to stay or dismiss this action because Defendants lawsuit against Playboy is pending in Illinois state court. (MTD at p. :-). It is improper for a district court to apply the first-to-file rule when one of the actions involved is pending in state court. See Just Film, Inc. v. Merchant Services, Inc., No. C CW, 0 WL, at * (N.D. Cal. Jan., 0) (denying motion to stay claims where first-filed case was filed in New York state court, because the first-to-file doctrine can only be applied to simultaneous actions in federal courts); AmSouth Bank v. Dale, F.d, n. (th Cir. 00) ( The district court also relied on the first-filed rule in denying the Receivers motion to dismiss, which was likely improper, in that the first-filed rule only

12 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #: applies to two cases filed in separate federal courts, and the Mississippi litigation was filed in state court. ) (internal citations omitted).. Even if the First-to-File Rule Could be Applied, the Two Actions Are Not Similar Even if the first-to-file rule could be applied to this action, it should not be applied because the actions are not similar. Defendants contention that this action is a mirror-image of the Illinois Action is simply wrong. The two actions are different: 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA Illinois Action This Action Involves other parties than the Only involves Playboy, three parties to this action. PlayBev, CBC, and CirTran Alleges state law contract and Alleges only federal Lanham tort claims based on the License Act claims, primarily trademark Agreement itself and conduct in infringement. connection with the License Agreement. Alleges facts purporting to Alleges facts establishing the establish breach of contract and unauthorized use of Playboy s tortious interference with trademarks. contract. The claims are based on alleged The claims are entirely based on conduct occurring during the conduct occurring after the term of the License Agreement. expiration of the Agreement. Only one of sixteen causes of action in the Illinois Action, where PlayBev and CBC seek to enjoin Playboy from terminating the Agreement, is even marginally related to Playboy s claims that Defendants have infringed the Playboy 0-v

13 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #: 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA Marks after the expiration of the Agreement. This is not enough to make the two actions substantially similar or duplicative, as required when invoking the first-tofile rule. See Alakozai v. Chase Inv. Services Corp., No. CV 0 SJO (JEMx), 0 WL, at *- (C.D. Cal. Mar., 0) (citations omitted). The cases cited by Defendants in which the first-to-file rule was applied involved claims and issues that were more closely related than those at issue here. 0-v For instance, in Alltrade, Inc. v. Uniweld Products, Inc., Uniweld filed a petition with the Trademark Trial and Appeal Board seeking cancellation of three trademark registrations owned by Alltrade, and the Board primarily ruled in favor of Uniweld. F.d, (th Cir. ). Uniweld then filed an action for trademark infringement, unfair competition, and anti-dilution against Alltrade and seeking review of certain aspects of the Board s decision in the Southern District of Florida. Id. The next day, Alltrade filed an action in the Central District of California seeking review of the Board s decision and a declaratory judgment that it did not infringe Uniweld s mark. Id. In that case, where both actions sought review of the same Board decision and both required determination of whether Alltrade had infringed Uniweld s mark, the actions were substantially similar under the first-to-file rule to warrant a stay of the California action. Id. at. In Pacesetter Systems, Inc. v. Medtronic, Inc., the first action filed by the plaintiffs alleged patent infringement, while the second action filed by the defendant sought a declaratory judgment that the same patents were invalid, not infringed, and unenforceable. F.d, (th Cir. ). The Ninth Circuit affirmed that the first-to-file rule was applicable. Id. at -. Playboy had good reason to bring its Lanham Act claims in this Court. Playboy wanted a federal court to hear its Lanham Act claims, rather than the Illinois state court. Playboy maintains its corporate headquarters in this district, and Defendants infringement is taking place in this district. Just because Playboy could assert counterclaims against Defendants in the Illinois Action, that does not

14 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #: 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA mean it is required to do so. Counterclaims in Illinois are permissive, not compulsory, so there is no risk that Playboy has acted improperly in bringing its Lanham Act claims in this Court rather than as counterclaims in the Illinois Action. See Corcoran-Hakala v. Dowd,, Ill. App. d, 0-(00) ( [I]n Illinois, counterclaims are generally permissive rather than mandatory. Thus, a defendant generally may raise his or her claim against the plaintiff by way of a counterclaim or by way of a separate action. ) (internal citations omitted). 0-v C. Venue is Proper in This District. The Forum Selection Clause Does Not Apply Because This Action Does Not Interpret the License Agreement Defendants are mistaken in asserting that the License Agreement s forum selection clause governs this action. A contractual forum selection clause is enforceable only when the claims asserted fall within the scope of the agreement. See Manetti-Farrow, Inc. v. Gucci Am., Inc., F.d 0, - (th Cir. ) (determining whether certain causes of action were within scope of forum selection clause). A forum selection clause only applies to tort claims if the resolution of the claims relates to the interpretation of the contract. Id. at. In Manetti-Farrow, Inc., the plaintiff alleged that the defendant raised prices above what it charged other customers, fraudulently obtained the plaintiff s customer lists, wrongfully neglected delivery orders, and wrongfully abrogated the contract those claims could not be adjudicated without determining whether the parties were in compliance with the contract, and in fact, they relate[d] to the central conflict over the interpretation of the contract. Id. The cases cited by Defendants in support of their forum selection clause argument are distinguishable because those cases clearly required interpretation of the contract containing the forum clause in order to resolve the plaintiffs claims. In Multimin USA, Inc. v. Walco Internation, Inc., the plaintiffs causes of action included breach of contract and misappropriation of trade secrets. CV F 0-0

15 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #: 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA AWI SMS, 00 U.S. Dist. LEXIS, at *- (E.D. Cal. Apr., 00). One term of the parties agreement was a secrecy clause that was binding on the defendants for five years after the agreement ended. See id. at *-. The plaintiffs even conceded that the agreement itself was at issue in the breach of contract, breach of fiduciary duty, conversion, and fraud causes of action. Id. at *. And while the plaintiffs argued that the other causes of action were unrelated to the agreement, all of their claims were predicated on an allegation that the defendants violated the agreement, specifically, that the agreement gave the defendants access to trade secrets and that the defendants actions violated the secrecy clause. Id. at *-. 0-v In Water, Inc. v. Everpure, Inc., the plaintiff initially asserted fourteen causes of action, including breach of contract. CV 0- ABC (SSx), 00 U.S. Dist. LEXIS, at * (C.D. Cal. Aug., 00). When faced with a motion to dismiss for improper venue, the plaintiff terminated the contract early and filed an amended complaint omitting the breach of contract claim. Id. at *-. After the defendant filed a second motion to dismiss for improper venue, the court found that the litigation hinged upon whether the terms of the agreement permitted the plaintiff s early termination. Id. at *-. Moreover, in Water, Inc., even the plaintiff s trademark infringement claims involved the interpretation of the contract, as the plaintiff was a licensee who was suing to stop the defendant from using the defendant s own trademarks in the plaintiff s area of distribution. Id. at *-. The terms of the agreement appointing the plaintiff as the exclusive distributor in the territory and acknowledging the defendant s ownership of the marks were necessarily implicated in the plaintiff s allegations challenging the defendant s right to use its own marks. Id. at *-. Here, Playboy s claims are outside the scope of the License Agreement s forum selection clause. Defendants portrayal of this action as relating to the terms of the parties business relationship and the Defendants right to utilize

16 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #: 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA Playboy s marks is overly broad. (See MTD at p. :-). This action has nothing to do with the terms of the parties business relationship or Defendants rights under the License Agreement to use the Playboy Marks: Playboy did not allege in this action that Defendants breached the Agreement. Playboy s Lanham Act claims do not require interpretation of any terms of the Agreement or adjudication of whether either party complied with the Agreement. Playboy does not seek to terminate the Agreement early (whether through this action or otherwise), but rather, the Agreement has already expired on its own terms. PlayBev had agreed to specific dates under which the Agreement would expire (which Defendants have not refuted), which were approved by the Bankruptcy Court, and all of which have passed. There is no question that the Agreement has expired, and Playboy s claims solely relate to Defendants conduct after the Agreement ended. Defendants do not dispute that Playboy owns the Playboy Marks or that the Marks and the Playboy brand are incredibly valuable. Defendants ongoing infringement and refusal to let go of the Marks is precluding Playboy from using its own property in the manner it wants. The only real issues in this action are Defendants infringement and the harm they are causing to Playboy not the harm to the infringing business of a holdover licensee, and not the conduct that purportedly took place during the Defendants misconstrue a statement made by Playboy s bankruptcy counsel before the Bankruptcy Court s hearing on a motion to convert or dismiss the bankruptcy case. (See MTD at p. :-). Playboy s bankruptcy counsel was making the point that Playboy abstained from taking a position on whether that Court should dismiss or convert the case. Playboy s counsel was not taking a definitive stand that all disputes (even those unrelated to the Agreement) would be litigated in Illinois. Defendants had already filed their Illinois Complaint, so it is logical that Playboy would make clear that it reserved the right to litigate the claims that had already been filed in Illinois. 0-v

17 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #: 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA Agreement. Defendants allegations of misconduct during the term of the Agreement (see MTD at p. :-:) or that Playboy had a good faith obligation to renew the Agreement (id. at p. :-) are immaterial to this action. Defendants made those contract and tort allegations and seek damages in the Illinois Action. Repeating those allegations in this action does not change the fact that well after such alleged conduct would have taken place, PlayBev agreed to specific expiration dates for the License Agreement, obtained a court order confirming those expiration dates, and those expiration dates have all passed. The expiration of the Agreement marks a clear line between claims requiring interpretation of the Agreement (which will be resolved in the Illinois Action) and Playboy s claims under the Lanham Act that do not require interpretation of the Agreement.. Even if the Venue Selection Clause Applied, it Allows Playboy to File in California However, even if the venue clause applied, Playboy has complied by filing in this Court. The venue clause gives Playboy the option of litigating in PlayBev s domicile: The parties hereto agree that any and all disputes arising out of or relating in any way to this Agreement shall be litigated only in courts sitting in Cook County, Illinois. Licensor shall have the option, however, to instead file lawsuit at licensee s domicile which will then be litigated in the courts competent for that domicile. (MTD at p. :-) (emphasis added). PlayBev is domiciled in California because one of its members, Fadi Nora, The License Agreement s selection of Cook County, Illinois was for Playboy s convenience. At the time the License Agreement was executed, Playboy s headquarters were in Cook County, Illinois. Now that Playboy s headquarters are in Beverly Hills, California, it is logical that Playboy would prefer to litigate in California. 0-v

18 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #: 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA is domiciled in California. (RJN, Ex. D [List of PlayBev Equity Security Holders]; see also Compl. ). An LLC, like PlayBev, is a citizen of every state of which its owners/members are citizens. Johnson v. Columbia Properties Anchorage, LP, F.d, (th Cir. 00); see also Cosgrove v. Bartolotta,0F.d, (th Cir. ). Defendants have not submitted any evidence showing otherwise. Thus, Playboy was allowed under the venue selection clause to sue PlayBev in California. IV. CONCLUSION Playboy properly filed its action in this Court to stop Defendants continuing and blatant trademark infringement after their License Agreement expired. The first-to-file rule does not prevent this Court from exercising its jurisdiction and adjudicating this action when the Illinois Action was filed in state court and involves different issues and claims. The License Agreement s venue clause does not apply because Playboy s Lanham Act claims are not within the scope of the expired Agreement. But even if the venue clause were applicable, it allows Playboy to sue in California, where PlayBev is domiciled. Defendants provide no reason for this Court to dismiss or even stay this action. Playboy respectfully requests that this Court deny their Motion. 0 Dated: January, 0 0-v VENABLE LLP By: /s/ Richard J. Frey Richard J. Frey Tamany Vinson Bentz Melissa C. McLaughlin Attorneys for Plaintiff Playboy Enterprises International, Inc.

19 Case :-cv-0-sjo-e Document Filed 0/0/ Page of Page ID #: STATE OF CALIFORNIA ) ) ss. COUNTY OF LOS ANGELES ) PROOF OF SERVICE I am employed in the County of Los Angeles, State of California. I am over the age of and not a party to the within action; my business address is Venable LLP, 0 Century Park East, Suite 0, Los Angeles, California. On January, 0, I caused a true and correct copy of the foregoing document(s) described as PLAINTIFF S OPPOSITION TO DEFENDANTS MOTION TO DISMISS PLAINTIFF S COMPLAINT, OR IN THE ALTERNATIVE, TO STAY ACTION to be filed with the Clerk of the Court through the U.S. District Court Electronic Court Filing System, which caused notice of such filing to be sent electronically to the following registered attorneys of record: 0 CENTURY PARK EAST, SUITE 0 LOS ANGELES, CA Bryon J Benevento benevento.bryon@dorsey.com, stauffer.erin@dorsey.com, smith.ron@dorsey.com Richard J Frey rfrey@venable.com, fmcclendon@venable.com Melissa Caren Rose McLaughlin mcmclaughlin@venable.com, sbpaulo@venable.com Kimberly Neville neville.kimberly@dorsey.com Tamany Vinson Bentz tjbentz@venable.com, hedmonds@venable.com Christopher Martinez martinz.cris@dorsey.com Karen A Morao morao.karen@dorsey.com Kent J Schmidt schmidt.kent@dorsey.com I declare that I am employed in the office of a member of the Bar of this Court at whose direction the service was made. I declare that I am employed in the office of a member of the Bar of this Court at whose direction the service was made. I declare under penalty of perjury under the laws of the United States of America that the above is true and correct. Executed on January, 0, at Los Angeles, California. /s/ Sandra B. Paulo Sandra B. Paulo 0-v CV-0 SJO (Ex)