Case Name: Legalforce, Inc. v. Legalzoom.com, Inc.

Case No.: 19CV345030

This matter is an offshoot of federal litigation between Plaintiff LegalForce, Inc., sometimes referred to as Trademarkia (“Plaintiff”) and Defendant LegalZoom.com, Inc. (“Defendant”) involving a dispute over trademark infringement currently ongoing in the United States District Court for the Northern District of California. Both parties are Delaware corporations.

The original and still operative Complaint in this matter was filed on March 22, 2019 and states four causes of action. The first is titled “Breach of Contract and Implied Covenant of Good Faith and Fair Dealing,” (two separate and distinct causes of action), alleging that Defendant breached an NDA the parties had signed by, among other things, “first purchasing, and then encouraging hundreds of their affiliates to advertise the literal characters of the TRADEMARKIA Marks [defined in the Complaint at ¶8 as three “U.S. federal trademark registrations” allegedly owned by Plaintiff] through the express characters of the Disputed Domain in an effort to create confusion in the marketplace as to the source and origin of Plaintiff’s products and services,” and by encouraging “small businesses in their LegalZoom Affiliate program to infringe on Trademarkia’s trademark rights . .” (Complaint at ¶¶ 69-73) Plaintiff’s “contract” damages are described as damages resulting from “LegalZoom’s infringing use of the Trademarkia Marks.” (Complaint at ¶76.)

The Complaint’s second cause of action is for Fraud, alleging that “LegalZoom misrepresented a material fact that it had a bona fide intent to license the Trademarkia Marks,” and that “LegalZoom falsified its interest in licensing the Trademarkia Marks and partnering with Trademarkia with the specific intent to steal trade secrets from Trademarkia.” (Complaint at ¶103.)

The Complaint’s third cause of action is for Constructive Fraud, alleging that “LegalZoom misrepresented a material fact that the Ledger [a term that is not defined in the Complaint] was created based on contemporaneous records and was an accurate reflection of attorney’s fees and costs incurred. Instead . . . LegalZoom manufactured the Ledger for the specific intent to deceive the Trademarkia.” (Complaint at ¶115 [brackets added].)

The Complaint’s fourth cause of action is for Civil Conspiracy, alleging in pertinent part that “LegalZoom conspired with Pepperjam [an advertising network service] to defraud and attempted to defraud the Trademarkia by making false representations of material facts and omissions of material facts when negotiating a license of material facts when negotiating a license of the Trademarkia Marks and partnership opportunities.” (Complaint at ¶119, brackets added].)

The First Amended Complaint (“FAC”) filed by LegalForce, Inc. in the second federal action (so far) between these same parties that was originally filed in the Central District before being transferred to the Northern District, is attached as Exhibit Z to the Complaint in this action. Plaintiff’s FAC in the federal action states four causes of action: (1) Trademark Infringement (15 U.S.C. §1114); (2) Trademark Infringement (15 U.S.C. §1125(a)); (3) Cyperpiracy (15 U.S.C. §1125(d)), and: (4) Trademark Infringement (Calif. Common Law). A review of the federal FAC reveals that many of the allegations in Plaintiff’s Complaint in this action were taken verbatim from the FAC in its federal action. (Compare, for example, Complaint at ¶¶71-73 with FAC at ¶¶71-73; See also exhibit 15 to the declaration of Defense Counsel Michelle Doolin in support of the motion to stay, a “red-line” comparison of the two pleadings prepared by Defendant.)

It is thus clear that the Complaint that this action involves the same subject matter and arises from the same alleged facts as the federal trademark infringement lawsuit regardless of the fact that different legal claims are made in the different forums based on the same factual allegations.

Currently before the Court are two matters: (1) Defendant’s motion to stay this action pending resolution of the clearly related federal litigation, and; (2) Defendant’s demurrer to Plaintiff’s Complaint.

Defendant’s Motion to Stay

Trial courts have the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency. (Freiberg v. City of Mission Viejo (1995) 33 Cal.App.4th 1484, 1489.) In addition, Code of Civil Procedure (“CCP”) section 410.30 provides that “[w]hen a court upon motion of a party or its own motion finds that in the interest of substantial justice an action should be heard in a forum outside this state, the court shall stay or dismiss the action in whole or in part on any conditions that may be just.” (CCP §410.30(a).)

The statute codifies the common law doctrine of forum non conveniens. This is not a jurisdictional doctrine. Rather, it is “an equitable doctrine invoking the discretionary power of a court to decline the exercise of jurisdiction (to stay or dismiss) it has over a transitory cause of action when it believes that the action may be more appropriately and justly tried elsewhere.” (Sangvik v. Shiley, Inc. (1991) 54 Cal.3d 744, 751; see also In re Christopher B. (1996) 43 Cal.App.4th 551, 559.)

“Granting a stay in a case where the issues in two actions are substantially identical is a matter addressed to the sound direction of the trial court.” (Thomson v. Continental Ins. Co. (1967) 66 Cal.2d 738, 746; see also Simmons v. Superior Court (1950) 96 Cal.App.2d 119, 123.) Specifically, “when a federal action has been filed covering the same subject matter as is involved in a California action, the California court has the discretion but not the obligation to stay the state court action.” (Caiafa Prof. Law Corp. v. State Farm Fire & Cas. Co. (1993) 15 Cal.App.4th 800, 804.)

“In exercising its discretion the court should consider the importance of discouraging multiple litigation designed solely to harass an adverse party, and of avoiding unseemly conflicts with the courts of other jurisdictions. It should also consider whether the rights of the parties can best be determined by the court of the other jurisdiction because of the nature of the subject matter, the availability of witnesses, or the stage to which the proceedings in the other court have already advanced.” (Farmland Irrigation Co. v. Dopplmaier (1957) 48 Cal.2d 208, 215.) The California Supreme Court also has isolated another critical factor favoring a stay of the state court action in favor of the federal action[:] … the federal action is pending in California [and] not some other state. (Thomson v. Continental Ins. Co., supra, 66 Cal.2d at p. 747.)

The Court is not required to make findings of fact in ruling on a motion to stay or dismiss. (See Cal-State Business Products & Systems, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1676.) An order granting a motion to stay or dismiss on grounds of inconvenient forum is immediately appealable. (CCP §904.1(a)(3).)

Defendant’s motion to stay this state court proceeding is GRANTED as the Court finds that it will serve the interest of justice and judicial efficiency for adjudication of the claims in this action to be stayed pending the determination of the trademark infringement claims in the federal action. This action is stayed in its entirety until the federal action between these same parties in the United States District Court for the Northern District of California, LegalForce, Inc. v. LegalZoom.com, Case No. 3:18-cv-07274-MMC, is resolved.

Defendant’s demurrer to the Complaint and associated request for judicial notice in support of that demurrer are ordered off calendar as MOOT in light of the Court’s ruling on the motion to stay.