UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

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1 Case 2:14-cv RGK-RZ Document 40 Filed 08/06/14 Page 1 of 6 Page ID #:293 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No. CV RGK (RZx) Date August 6, 2014 Title DANZIG v. CAIAFA, et al. Present: The Honorable R. GARY KLAUSNER, U.S. DISTRICT JUDGE Sharon L. Williams (Not Present) Not Reported N/A Deputy Clerk Court Reporter / Recorder Tape No. Attorneys Present for Plaintiffs: Not Present Attorneys Present for Defendants: Not Present Proceedings: (IN CHAMBERS) Order Re: Defendants Motion to Dismiss (DE 14) I. INTRODUCTION On April 3, 2014, Glenn Danzig ( Plaintiff ) filed a Complaint against Gerald Caiafa ( Caiafa ) and Cyclopian Music, Inc. ( CMI ) (collectively, Defendants ) in this Court. Plaintiff alleges five claims in his Complaint: (1) Breach of Contact; (2) Violation of Lanham Act; (3) Interference with Prospective Business Advantage; (4) Accounting; and (5) Declaratory Relief. Presently before the Court is Defendants Motion to Dismiss Plaintiff s Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the Court GRANTS Defendants Motion with leave to amend a portion of Plaintiff s Complaint. II. FACTUAL BACKGROUND Plaintiff alleges the following facts: A. The Formation And Breakup of The Misfits In 1977, Plaintiff founded the rock group The Misfits. Caiafa joined the band shortly after its formation, replacing the original bass player. The Misfits were considered a prominent part of the punk rock scene until Plaintiff was the creative force behind The Misfits, writing the majority of music and all the lyrics of the band s songs. Plaintiff was also responsible for placing skeletal patterns and motifs into The Misfits performances. The Fiend Skull developed from this and ultimately became The Misfits logo. In 1983, The Misfits disbanded because Plaintiff decided to pursue other projects. The time period is known by The Misfit fans as the Classic Misfits Era. After The Misfits disbanded, Plaintiff continued to perform The Misfits songs in live performances, to sell merchandise bearing The Misfits name, and to refer to The Misfits in interviews and performances. Following the breakup of the band, Caiafa disavowed involvement with The Misfits material. He worked at his father s factory and started a different band. Plaintiff achieved individual success, which led to a renewed interest in The Misfits. In the late 1980s, The Misfits albums were reissued and other successful bands recorded and released The Misfits songs. 1

2 Case 2:14-cv RGK-RZ Document 40 Filed 08/06/14 Page 2 of 6 Page ID #:294 B. The Settlement Agreement Between Plaintiff and Caiafa In 1992, Caiafa and other former band members filed a lawsuit against Plaintiff in the United States District Court for the Southern District of New York. The former members claimed the exclusive right to use The Misfits name and associated logos and artwork. In 1994, the two parties entered into a written settlement agreement ( 1994 Agreement ). Plaintiff signed the Agreement in Los Angeles, California, and it is believed that Caiafa signed the Agreement in New York City, New York. The 1994 Agreement contained a paragraph entitled Merchandising that provided that Plaintiff and Caiafa would share ownership of The Misfits name, trademarks, logos, and artwork that existed during the Classic Misfits Era. The agreement also provided that each party shall retain any artwork created by that party, and not previously utilized on Misfits albums, merchandise or advertising. Following the 1994 Agreement, Plaintiff and Caiafa both used The Misfits name, trademarks, logos, and artwork. In 1995, Caiafa formed a new band which he called The Misfits. C. The Registered and Pending Trademarks In 2000, Caiafa filed four separate applications with the United States Patent and Trademark Office ( PTO ) to register trademarks relating to The Misfits. He did this without Plaintiff s knowledge or consent. The PTO granted each of these applications. The first and second registrations were for the trademark MISFITS. The third registration was for a trademark consisting of the word MISFITS in stylized script. Plaintiff alleges Caiafa obtained these three trademarks by fraudulently concealing Plaintiff s co-ownership and fraudulently misrepresenting that the first use of the mark was been after the band separated. The fourth mark registered was a trademark of the Fiend Skull. Plaintiff also alleges that Caiafa fraudulently concealed his co-ownership of that mark. Caiafa still has two other trademark applications pending with the PTO. Plaintiff has now filed for a cancellation proceeding with the Trademark Trial and Appeals Board ( TTAB ) to cancel all the PTO registered trademarks. Plaintiff has also filed for an opposition proceeding with TTAB to oppose approval Caiafa s pending applications. D. Defendants Wrongful Conduct Plaintiff alleges that Defendants have notified merchandisers that any license to sell the registered trademarks must be on condition that the merchandisers do not enter into license agreements with Plaintiff. If merchandisers break this condition Defendants will seek monetary penalties. Hot Topic is one of the largest retailers of The Misfits products and is allegedly held to the agreement not to license with Plaintiff. Plaintiff alleges that Defendants directed the threat of monetary penalties toward Hot Topic and that this threat has resulted in Hot Topic s refusal to conduct business with Plaintiff. III. JUDICIAL STANDARD The federal pleading standard states in relevant part that a claim for relief must contain... a short and plain statement of the claim showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2). Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may move to dismiss for failure to state a claim upon which relief can be granted. In deciding a Rule 12(b)(6) motion, the court must assume allegations in the challenged complaint are true, and construe the complaint in the light most favorable to the non-moving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, (9th Cir. 1996). However, a court need not accept as true unreasonable inferences, unwarranted deductions of fact, or conclusory legal allegations cast in the form of factual allegations. See W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Furthermore, a pleading must contain sufficient factual matter that, if accepted as true, states a claim that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 2

3 (2009). A claim is facially plausible when there are sufficient factual allegations to draw a reasonable inference that the defendant is liable for the misconduct alleged. Id. IV. Case 2:14-cv RGK-RZ Document 40 Filed 08/06/14 Page 3 of 6 Page ID #:295 DISCUSSION Defendants argue that each of Plaintiff s claims must be dismissed because they fail to state a claim for which relief can be granted. The Court addresses each claim in turn. A. Claim For Breach of Contract Plaintiff s Complaint alleges that Caiafa has breached and continues to breach the 1994 Agreement. Defendant argues that Plaintiff s claim fails. The Court agrees. The 1994 Agreement is governed by the laws of the State of New York. (Defs RJN, Ex. 7, 13.) For a party to make a viable claim for a breach of contract under New York law, a complaint need only allege: (1) the existence of an agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages. Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 177 (2d Cir. 2004). The complaint must also allege the provisions of the contract that were allegedly breached. Woodhill Elec. v. Jeffrey Beamish, Inc., 904 N.Y.S.2d 232, 233 (N.Y. App. Div. 2010); Stadt v. Fox News Network LLC, 719 F. Supp. 2d 312, 318 (S.D.N.Y. 2010). Here, the only element in dispute is the breach of contract by Defendants. In his Complaint, Plaintiff alleges that Caiafa breached the agreement by applying for and pursuing trademark registration as the sole owner of the trademarks. (Compl. 30.) Plaintiff also alleges that Caiafa breached the agreement by notifying merchandisers that if they license with Defendants they are not allowed to enter into a license agreement with Plaintiff. (Compl. 31.) Plaintiff does not directly allege which terms of the 1994 Agreement Defendants allegedly breached. Rather Plaintiff generally refers to the Merchandising paragraph, implying that Defendants breached the terms in that provision. (See Compl. 19); (Defs RJN, Ex. 7, 5.) The Merchandising provision states that [t]he parties shall be co-owners of the name and trademarks of the Misfits and logo(s) and artwork (including all artwork used on Misfits releases for Slash, Caroline or Plan 9 Records) previously associated therewith. Each party shall retain exclusive ownership of any artwork created by that party and not previously utilized on Misfits albums, merchandise or advertising. The provision also grants the non-exclusive right to conduct merchandising and to exploit other rights relating to the use and exploitation of the name Misfits. The provision ends by stating that [Caiafa] and Danzig will each retain 100% of what each earns from the exploitation of merchandising rights and neither [Defendants] nor [Plaintiff] has any obligation to account to the other for any revenues derived from the exploitation of merchandising or any other rights. (Defs RJN, Ex. 7, 5.) Deeming the allegations in the Complaint as true, the Court finds no alleged facts that constitute a breach of the merchandising provision. The Complaint expressly alleges that the designs at issue are co-owned by Plaintiff and Caiafa. As to co-owned designs, the provision contemplates that Caiafa has a non-exclusive right to merchandise products and otherwise exploit the designs. The provision also allows Caiafa to retain 100% of earnings from such exploitation. The terms of the provision do not address any obligation regarding trademark registration or negotiations with individual retail merchandisers as to licensing. Moreover, in reviewing the other provisions contained in the

4 Case 2:14-cv RGK-RZ Document 40 Filed 08/06/14 Page 4 of 6 Page ID #:296 Agreement, 1 the Court also finds no other terms that govern the parties conduct as it pertains to trademarking and licensing. As such, the Court finds that Plaintiff has failed to adequately allege a requisite element of the claim, and dismisses the claim with leave to amend. B. Claims For Violating The Lanham Act Under 15 U.S.C. 1125(a) Under 15 U.S.C. 1125(a), a party can plead a claim under either 1125(a)(1)(A) or 1125(a)(1)(B). Plaintiff s Complaint does not specify which section is being violated. As a result the Court looks to both sections and determines that Plaintiff has failed to state a claim under either one. Section 1125(a)(1)(A) of the Lanham Act states that a civil action may be brought against: [a]ny person who, on or in connection with any goods or services... uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description 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 association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person. To establish a claim under section 1125(a) of the Lanham Act, Plaintiff must prove that(1) he has a valid trademark and (2) Defendants use of the same or similar mark is likely to cause confusion in the minds of the consumers as the origin or source of the products. Fuddruckers, Inc. v. Doc's B.R. Others, Inc., 826 F.2d 837, 841 (9th Cir. 1987); Brookfield Commc'ns, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036, 1046 (9th Cir. 1999). To make a claim for false advertising under 1125(a)(1)(B), a plaintiff must allege sufficient facts to prove the following elements: (1) in its... advertisements, defendant made false statements of fact about its product or the product of another; (2) those advertisements actually deceived or have the tendency to deceive a substantial segment of their audience; (3) the deception is material, in that it is likely to influence the purchasing decision; (4) defendant caused its falsely advertised goods to enter interstate commerce; and (5) plaintiff has been or is likely to be injured as the result of the foregoing either by direct diversion of sales from itself to defendant, or by lessening of the good will which its products enjoy with the buying public. Summit Tech., Inc. v. High-Line Med. Instruments, Co., 933 F. Supp. 918, 929 (C.D. Cal. 1996). The factual allegations upon which Plaintiff rests his claim are the same of those stated in support of his breach of contract claim. Like the breach of contract claim, Plaintiff s trademark infringement claim fails. As stated above, 1125(a)(1)(A) requires an allegation that Defendants use of the mark is likely to cause customer confusion as to the source or origin of the product being sold. The Complaint makes no such allegation. To the extent Plaintiff argues that Hot Topic or other merchandisers are the customer, the Complaint alleges that Defendants specifically informed Hot Topic that Plaintiff was not involved. Therefore, the facts alleged in the Complaint itself indicate that 1 The 1994 Agreement is not attached to the Complaint, but the court may consider the agreement because it is incorporated by reference in the complaint. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). 4

5 Case 2:14-cv RGK-RZ Document 40 Filed 08/06/14 Page 5 of 6 Page ID #:297 Defendants are expressly disassociating their products from Plaintiff. As to 1125(a)(1)(B), the provision involves false advertising. Plaintiff has made no allegation that Defendants engaged in the advertising of any product. Based on the foregoing Plaintiff fails to adequately allege a claim for trademark infringement under section 1125(a). Based on the facts alleged, the Court finds that this defect cannot be cured. Therefore, the Court dismisses this claim without leave to amend. C. Claim For Interference With Prospective Business Advantage To state a claim for interference with prospective business advantage the plaintiff must allege sufficient facts to show: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant s knowledge of the relationship; (3) intentional [wrongful] acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant. Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1151 (9th Cir. 2008). Plaintiff does not allege sufficient facts to show that relief may be granted. As stated above, the claim requires that an economic relationship must exist between the plaintiff and some third party, which the defendant had knowledge of and intentionally disrupted.. Here, Plaintiff does not allege facts that directly, or even indirectly, suggest any existing relationship with a third party that was known and disrupted by Defendants. The Complaint alleges only that Defendants, who had already established a relationship with Hot Topic, prevented Plaintiff from developing a future relationship with Hot Topic. Accordingly, Plaintiff has failed to adequately allege a claim for Interference With Prospective Business Advantage, and the Court dismissed this claim with leave to amend. D. Claim For Declaratory Relief Plaintiff requests that the Court declare he is a co-owner of the trademarks, that Caiafa s registration of the registered and pending trademarks was fraudulent and in breach of the 1994 Agreement, and that these trademark registrations should be cancelled. The Court exercises its discretion and dismisses the claim for declaratory relief. 28 U.S.C provides that [i]n a case of actual controversy within its jurisdiction a court may declare the rights and other legal relations of a party. The Supreme Court has held that a claim for declaratory relief can be brought in cases or controversies that are justiciable under Article III. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). However, district courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites. Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995). When a district court decides to exercise its jurisdiction under the Declaratory Judgments Act, [it] must balance concerns of judicial administration, comity, and fairness to the litigants. Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1367 (9th Cir. 1991). The only portion of the claim still at issue is Plaintiff s request for a declaration regarding the ownership of the trademarks and the validity of the trademark registrations. Plaintiff has filed a request with the Trademark Trial and Appeals Board ( TTAB ) to cancel Defendants registered trademarks. (Compl. 23,24.) The pending proceedings necessarily involve a determination of the issues presented 5

6 Case 2:14-cv RGK-RZ Document 40 Filed 08/06/14 Page 6 of 6 Page ID #:298 in the claim. As such, the Court exercises its discretion and determines that in the interest of judicial administration and judicial economy, it will not adjudicate this claim. Therefore, the Court dismisses the claim without leave to amend. E. Claim For Accounting A right to an accounting is derivative; it must be based on other claims. Janis v. California State Lottery Com., 80 Cal. Rptr. 2d 549, 554 (1998). Because all of Plaintiff s other claims fail, there can not be a claim for accounting. Therefore, the Court dismisses this claim with leave to amend. V. CONCLUSION For the foregoing reasons, the Court GRANTS Defendants Motion to Dismiss for failing to state a claim upon which relief can be granted. As to Plaintiff s claims for violation of the Lanham Act and Declaratory Judgment, the Court GRANTS Defendants motion without leave to amend. As to all other claims, the Court GRANTS Defendants motion with leave to amend. Any amended complaint shall be filed and served no later than August 15, IT IS SO ORDERED. Initials of Preparer : 6