Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 1 of 13 Page ID #:10547
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
Present: The Honorable
Date
May 12, 2015
Philip S. Gutierrez, United States District Judge
Wendy Hernandez
Not Reported
Deputy Clerk
Court Reporter
Attorneys Present for Plaintiff(s):
Attorneys Present for Defendant(s):
Not Present
Not Present
Proceedings (In Chambers):
Order GRANTING Defendants’ motion for an order dissolving the preliminary injunction.
Pending before the Court is Defendants and Counterclaimants Randy H. McMurray, P.C. and Randy H. McMurray’s (collectively referred to as “McMurray” or “Defendant”)1 motion for an order dissolving the preliminary injunction or increasing the bond amount. Dkt. # 348. The Court finds this matter appropriate for decision without oral argument. See Fed. R. Civ. P. 78(b); L.R. 7-15. After considering the papers and evidence submitted by the parties, the Court GRANTS the motion for an order dissolving the preliminary injunction.
I.
Introduction
This lawsuit involves intellectual property rights to the trademark “The Cochran Firm.” See generally Second Amended Complaint (“SAC”). McMurray brings this motion in an attempt to dissolve a preliminary injunction that was granted in favor of Plaintiff The Cochran Firm, P.C. (“The Cochran Firm” or “Plaintiff”), which essentially enjoins him, with limited exceptions, from using the term “Cochran.” Dkt. # 264. According to McMurray, the Court should dissolve the preliminary injunction because Plaintiff has unclean hands in the use of its trademark by advertising itself as a “national law firm” when it is “in fact comprised of a network of licensee-licensor relationships.” Mot. 1:7-11; 18:12-21:19. II.
Background
1
Although the McMurray Defendants are plural, the Court will refer to them as McMurray singularly. 1
Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 2 of 13 Page ID #:10548
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Date
May 12, 2015
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
Plaintiff is an Alabama corporation formed in 1998 under the name Cochran, Cherry, Givens & Smith, P.C. SAC ¶ 12. The firm later changed its name to The Cochran Firm – Cochran, Cherry, Givens, Smith & Sistrunk, P.C. and subsequently filed an amendment to its articles of incorporation changing its name to “The Cochran Firm, P.C.” See Dkt. # 156-7. In the spring of 1999, Johnnie Cochran Jr. (“Cochran”), Samuel A. Cherry (“Cherry”), J. Keith Givens (“Givens”), and Jock Smith entered into a California limited liability partnership that they named Cochran, Cherry, Givens & Smith LLP (the “California LLP”). Fourth Amended Counterclaim (“FACC”) ¶ 7. The California LLP began with offices in New York and Los Angeles. Id. ¶ 25. According to McMurray, he was asked to join the California LLP as a co-managing partner of the Los Angeles office in June 1999. Id. ¶ 26. In March of 2005, Cochran registered “The Cochran Firm” as a trademark with the United States Patent and Trademark Office (“USPTO”). Id. ¶ 34. Plaintiff acquired rights to the mark under an assignment agreement after Cochran’s death. Id. ¶¶ 35-36. McMurray purchased the California LLP’s Los Angeles office in January 2007 and the next month formed a general partnership with Brian T. Dunn (“Dunn”) that took over the California LLP’s Los Angeles office. Id. ¶ 41. McMurray alleges that Cherry and Givens consented to the partnership’s use of the name “The Cochran Firm Los Angeles.” Id. ¶ 42. At some point Joseph Barrett (“Barrett”) also became a partner of The Cochran Firm Los Angeles. Id. ¶¶ 50-52. Plaintiff pleads that it made numerous attempts to “memorialize and execute an agreement outlining the partner and licensing relationship between the National Firm and the Los Angeles local office.” SAC ¶ 32. Under the drafts of these agreements, The Cochran Firm Los Angeles had a duty to “pay Plaintiff a portion of the fees earned and received by the Los Angeles office as compensation for administrative, IT, marketing, practice benefits and support of being a Cochran Firm local office.” Id. ¶ 35. Although no such agreement was ever executed by both Plaintiff and McMurray, from January 2006 until September 2010, The Cochran Firm Los Angeles complied with the “monthly reporting requirements and payment of the agreedupon National compensation.” Id. ¶ 37. In February 2012, Plaintiff sent McMurray and Barrett a Cease and Desist letter informing them that they were no longer allowed to use “The Cochran Firm” mark. Id. ¶ 42. McMurray claims that his relationship with Dunn and Barrett deteriorated and that Cherry and Givens convinced them to join a conspiracy to oust McMurray from The Cochran Firm Los Angeles. FACC ¶¶ 59-75. McMurray alleges that they formed a corporation, Dunn Law APC dba The Cochran Firm California to replace The Cochran Firm Los Angeles and engaged in various fraudulent and wrongful acts. Id. A.
Procedural Background
Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 3 of 13 Page ID #:10549
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Date
May 12, 2015
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
On November 26, 2012, Plaintiff filed a SAC against The Cochran Firm Los Angeles, GP, and McMurray alleging trademark infringement for using the mark “The Cochran Firm.” Dkt. # 36. McMurray filed counterclaims against Counterdefendants The Cochran Firm, P.C.; The Cochran Firm – Cochran, Cherry, Givens, Smith & Sistrunk, P.C.; Dunn Law, APC; Brian T. Dunn; Samuel A. Cherry; J. Keith Givens; Joseph Barrett; and Barvie Koplow alleging that they are liable for various fraudulent actions. FACC. In January of 2013, Plaintiff filed a motion for a preliminary injunction forbidding McMurray from using the mark “The Cochran Firm” that was granted, and later modified, by U.S. District Court Judge Otero. See Dkts. # 58, 102. McMurray appealed the modified injunction to the United States of Appeal for the Ninth Circuit. Dkt. # 125. While the appeal was pending, this matter was transferred to U.S. District Court Judge O’Connell. Dkt. # 176. On May 30, 2014, the Ninth Circuit issued a mandate reversing the preliminary injunction order and remanding the action to the district court. Dkt. # 242 (“Mandate”). Although the Ninth Circuit found that the district district court did not abuse its discretion in concluding that Plaintiff was likely to demonstrate that it owns The Cochran Firm trademark, it remanded “for the district court to augment the record and to reconsider [McMurray’s] unclean hands argument.” Mandate at 3. The Ninth Circuit emphasized that the structure of Plaintiff’s “business is important in assessing whether [it] has unclean hands” but that “the record . . . [did not] provide sufficient information about the relationships both between [Plaintiff] and the local offices, or between [Plaintiff] and the public.” Id. at 4-5. The Ninth Circuit instructed the Court to keep the preliminary injunction in place while it examined the issue. Id. at 5. Additionally, the Ninth Circuit, finding the injunction to be too broad, instructed the district court to tailor the injunction so as to burden no more protected speech than necessary. Id. at 5-6. In response to the Ninth Circuit Mandate, McMurray filed an ex parte application on June 6, 2014 requesting that the district court vacate certain portions of the injunction and set an evidentiary hearing. Dkt. # 243. On September 23, 2014, Judge O’Connell granted the application in full and set an evidentiary hearing to be held October 21, 2014 “to examine only the specific issue of Plaintiff’s business structure as it relates to ‘whether [Plaintiff] has unclean hands in its use of the Cochran Firm trademark.’” Id. (emphasis and modification in original). The district court held an evidentiary hearing on October 21 and 22, 2014 to examine this issue. Dkts. # 302, 303. On October 30, 2014 McMurray filed an ex parte application for an order admitting additional evidence that was granted in part and denied in part. Dkt. # 312. On November 17, 2014, this matter was assigned to this Court after Judge O’Connell 3
Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 4 of 13 Page ID #:10550
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Date
May 12, 2015
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
recused herself. Dkt. # 324. McMurray’s motion seeks an order dissolving the preliminary injunction or, in the alternative, increasing the bond amount. Mot. B.
Evidentiary Hearing
McMurray has outlined evidence that he argues supports his argument that Plaintiff is comprised of a network of licensee-licensor relationships and not a single, national firm as it has advertised to the public. Mot. 8:3-12:9. McMurray points to the declaration of Cherry, one of Plaintiff’s principals, who describes The Cochran Firm as a “National Firm with aregional [sic] offices.” Dkt. # 268-1, Declaration of Samuel A. Cherry, Jr. (“Cherry Decl.”) ¶ 5. According to Cherry, “each regional office enters into an agreement with national which governs its operation as part of The Cochran Firm” and these agreements either consist of partnership agreements between Plaintiff’s principals and local attorneys or as operating agreements between partners (the partners being National and local attorneys). Id. Although Cherry declared that it forms partnerships with partners at the regional offices, Defendant submitted sworn declarations from three partners at Plaintiff’s Alabama Office each stating that he or she has “not now nor . . . ever been a partner or employee of The Cochran Firm, P.C., also known as Cochran National.” See Declaration of Yana G. Henriks (“Henriks Decl.”), Exs. 9, Declaration of Joseph D. Lane (“Lane Decl.”) ¶ 3; 10, Declaration of Angela J. Mason (“Mason Decl.”) ¶ 3; Declaration of J. Farrest Taylor (“Taylor Decl.”) ¶ 3. Plaintiff represented to the district court in its motion for preliminary injunction that at some point it “re-established its Los Angeles office and rehired Mr. Dunn and Mr. Barrett as its managing partners.” Mot. for PI 5:7-8; see also Declaration of Samuel A. Cherry I/S/O Mot. for PI ¶ 18 (“After I sent McMurray the cease and desist letter, The Cochran Firm re-established its Los Angeles office by granting Mr. Dunn permission to begin to do business as The Cochran Firm California, of which Mr. Dunn is managing partner.”). On February 16, 2012 Dunn filed a fictitious business name statement, on behalf of Dunn Law, APC, declaring that Dunn Law, APC is the sole owner of the business operating as “The Cochran Firm California” and “The Cochran Firm.” Defendant’s Request for Judicial Notice (“Def.’s RJN), Ex. 9.2 In December of 2012, McMurray requests that the Court take judicial notice of certain public documents. See Def.’s RJN. The Court may take judicial notice of and consider matters that are not subject to reasonable dispute, including public records. See Fed. R. Evid. 201(b); Dudum v. Arntz, 640 F.3d 1098, 1101 n.6 (9th Cir. 2011) (taking judicial notice of a verifiable public
2
Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 5 of 13 Page ID #:10551
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Date
May 12, 2015
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
Betty Jackson (“Jackson”), obtained a judgment against The Cochran Firm, amongst other entities, for the return of client funds wrongfully retained that she was entitled to based on a settlement that Dunn signed on behalf of The Cochran Firm. See Henriks, Exs. 7, 8. McMurray states that Jackson obtained a court order authorizing the seizure of Dunn Law, APC funds to cover the unpaid judgment to which Dunn responded with a verified third party claim of ownership on behalf of Dunn Law, APC stating that it is “a separate and distinct entity from the Judgment Debtors.” Id., Ex. 6. McMurray also points the Court to copies of operating agreements entered into between Plaintiff and its regional offices that were admitted during the evidentiary hearing. See Dkt. # 294. In the Operating Agreement for The Cochran Firm – New York (“New York Operating Agreement”), the agreement provides that the parties – Plaintiff, Paul B. Weitz and Associates, P.C., and The Cochran Firm – New York, P.C. – “do not intend to form a partnership.” Henriks Decl., Ex. 5. The New York Operating Agreement also provides that the regional office is responsible for all costs associated with its operation, including advertising. Id. § 4.3. According to the New York Operating Agreement, Plaintiff is entitled to a certain share of the local office’s distributable income. Id. § 5.2. Specifically, Plaintiff is to receive a percentage of the gross fee revenue generated by the regional office within five days after the end of each month. Id. § 5.2-5.4. Additionally, the Operating Agreement provides that the local office must use the case management and accounting software chosen by Plaintiff and allow it “remote computer access to the case management and accounting information of the Practice” and that Plaintiff has sole ownership over The Cochran Firm name. Id., Annex II at §§ 4,8. Other agreements provide similar provisions regarding each regional office’s responsibility for certain costs, fees paid to Plaintiff, and terms regarding the software that must be used. See Cherry Decl., Exs. A-Q. McMurray also describes testimony given by Austin Headland, Plaintiff’s controller, in a deposition. Dkt. # 286-1, Deposition of Austin Headland (“Headland Depo.”). Headland stated that he is also the controller for each of Plaintiff’s regional offices. Headland Depo. 9:1-25. According to Headland, Plaintiff does not pay for payroll, lease, rent, phone, or computer expenses as well as malpractice insurance. Id. 21:21-24. Headland also confirmed, after being asked about each one of Plaintiff’s regional offices, that the regional offices are separate entities, that Plaintiff does not pay for their operating expenses, liabilities, or malpractice insurance, and that Plaintiff does not file joint tax returns with these offices. Id. 25:10-38:18. Headland also testified that he is employed by U.S. Legal P.C, owned by Givens, which provides management company services for Plaintiff. Id. 8:5-10. record). Accordingly, the Court GRANTS McMurray’s request. 5
Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 6 of 13 Page ID #:10552
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Date
May 12, 2015
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
In his declaration, offered in lieu of direct examination, Plaintiff’s expert, John Steele, stated that The Cochran Firm is “a network of partnerships between Cochran National and the regional entities.” Dkt. # 268-19, Declaration of John Steele (“Steele Decl.”) ¶ 19. During the evidentiary hearing, Steele testified that the network of the regional offices “is built with agreements with national” but that he was not aware of any agreements entered into between the regional offices. Evidentiary Hearing Transcript (“TR”) 60:11-61:11. McMurray’s expert, in turn, described The Cochran Firm during the evidentiary hearing as not a national firm, but instead like “Jupiter with satellite moons.”3 TR 126:5-15. In opposition, Plaintiff, too, highlights certain sections of Cherry’s declaration to support its argument that it has the elements that a public would expect from a national firm. According to Cherry, National requires that the regional offices maintain a minimum amount of insurance. Cherry Decl. ¶ 5(d). Cherry states that “each regional office is managed by a managing partner that Johnnie Cochran personally knew, trusted, vetted, and selected” and that an office that fails to meet The Cochran Firm’s quality standards is removed from the firm. Id. ¶¶ 5, 6. Lastly, Cherry outlines the control to which regional offices are subject to by National. Id. ¶ 5. For example, Plaintiff’s Administration Coordinator, Bonnie Niver, communicates frequently with the regional offices, Plaintiff requires the regional entities to use the same case management software, provides templates for documents (letterhead, business cards, and pleadings) and, via the operating agreements, requires that each regional office abide by applicable law and ethical rules and to comply with its National Operating Procedures. Id. Plaintiff also points to testimony given by Givens at the evidentiary hearing purportedly about certain profits, expenses, and liabilities that are shared between Plaintiff and each of its regional offices. Opp. 5:22-8:9. For example, Givens testified that the Cochran firm sometimes engages in class action campaigns and multi-district litigation which includes participation of multiple regional offices and results in profit sharing. TR 157:18-158:8. According to Givens, Plaintiff also has employees in the following divisions that assist the regional offices with various services: (1) Accounting; (2) Marketing and Advertising; (3) IT; (4) Operations Management; (5) HR and Legal; (6) Client Services Center; and (7) Web and Internet. TR 154:18-155:13. Givens testified that the accounting department has CPAs, bookkeepers, and accountants that offer general services to the regional offices. Id. 155:9-19. Givens also stated that the client services center is a call center that receives around 300,000 annual calls to 1-800Plaintiff attacks Peck’s credibility by writing that she has zero experience as a partner at a law firm, has never done transactional work, and has never formed a law firm. See Opp. 12:7-11. The Court disagrees that these facts render Peck’s testimony less credible, especially in light of her experience as a scholar of legal professional responsibility and experience as a judge of the California State Bar Court. See generally Peck Decl.
3
Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 7 of 13 Page ID #:10553
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Date
May 12, 2015
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
THEFIRM and that employees at this call center conduct preliminary client interviews, gather medical records, obtain fee agreements, and enter all information gathered into a Client Profiles System that is accessible to all regional offices. Id. 158:11-18; 160:17-161:4. Lastly, Givens testified that Plaintiff has “joint responsibility with the regional offices for professional compliance with all of the Bar regulations.” Id. 159:3-7. i.
Excluded Evidence
McMurray argues that certain evidence was wrongfully excluded by Judge O’Connell during the evidentiary hearing held in October 2014 and in response to McMurray’s ex parte application seeking to admit additional evidence. Mot. 12:21-18:12. The Court agrees with the decisions made by Judge O’Connell and, therefore, declines to admit and consider this evidence for purposes of this motion. As to McMurray’s argument that the district court wrongfully denied McMurray additional time to cross-examine Cherry and Givens, the Court finds that the denial was not wrongful. Judge O’Connell instructed the parties to provide a list of proposed witnessed before the hearing and their declarations to serve as direct examination and then each party was allotted 1.5 hours to present their side during the evidentiary hearing to use as they thought appropriate. Dkt. # 264; TR 10:2-7. McMurray requested extra time, and Judge O’Connell gave him ten extra minutes and then commented that she would not allow him to “waste the Court’s time . . . by asking the same questions, asking argumentative questions, fighting with the witness, smirking, and asking questions irrelevant to . . . the mandate.” Id. 111:23-113:1. Courts have the inherent power to manage their own affairs as to achieve the orderly and expeditious disposition of cases.” Ready Transp., Inc. v. AAR Mfg., Inc., 627 F.3d 402, 404 (9th Cir. 2010) (quotations omitted) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991). Considering the limited mandate for which the matter was remanded, Judge O’Connell’s time limitations were reasonable. Furthermore, as to the two samples of The Cochran Firm’s advertising that were denied for a lack of foundation, the Court concludes that McMurray’s attempt to introduce them now is untimely. See id. 17:17-18:3. III.
Legal Standard
“A district court has inherent authority to modify a preliminary injunction in consideration of new facts.” A&M Records, Inc. v. Napster, Inc., 284 F.3d 1091, 1098 (9th Cir. 2002) (citing System Federation No. 91 v. Wright, 364 U.S. 642 (1961). 7
Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 8 of 13 Page ID #:10554
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Date
May 12, 2015
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
A party seeking a preliminary injunction must make a “clear showing” that: (1) it is likely to succeed on the merits; (2) that it is likely to suffer irreparable harm if an injunction is not granted; (3) that the balance of equities tips in its favor; and (4) that an injunction is in the public interest. Winter v. N.R.D.C., 555 U.S. 7, 20, 22 (2008). In the Ninth Circuit, a preliminary injunction may also be appropriate if “a [movant] demonstrates . . . that serious questions going to the merits were raised and the balance of hardships tips sharply in the [movant’s] favor,” so long as the Winter irreparable injury and public interest factors are satisfied. See Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1134-35 (9th Cir. 2011) (citation omitted). IV.
Discussion
McMurray argues that the Court should dissolve the injunction because (1) Plaintiff has unclean hands in its use of The Cochran Firm Trademark and (2) Plaintiff filed a sham action. See Mot. 18:13-24:28. Alternatively, McMurray requests that the Court increase the bond from $25,000 to $1,000,000 because the “preliminary injunction has caused McMurray damages in an amount that exceeds one million dollars.” Id. 25:1-18. The Court agrees, at this stage, that Plaintiff has unclean hands and, therefore, declines to address McMurray’s second argument and finds that McMurray’s request to lower the bond amount is rendered moot. A.
Unclean Hands
To prevail on a federal trademark infringement cause of action, a plaintiff must show (1) ownership of a registered mark; (2) the defendant’s use of that mark in commerce; and (3) a likelihood of confusion. 15 U.S.C. § 1114(1); KP Permanente Make-Up, Inc v. Lasting Impression I, Inc., 408 F.3d 596, 602 (9th Cir. 2005). In granting Plaintiff’s motion for a preliminary injunction, Judge Otero found that Plaintiff met its burden that it was likely to succeed on the merits of its trademark infringement cause of action. Dkt. # 58. Although the Ninth Circuit found that the district court did not abuse its discretion when it found that Plaintiff was likely to demonstrate that it owns The Cochran Firm Trademark, it remanded the action for the district court to “reconsider [McMurray’s] unclean hands argument” after augmenting the record. Mandate at 3. As the Ninth Circuit explained, the doctrine of unclean hands is a defense to trademark infringement suits. Mandate at 4; Fuddruckers, Inc. v. Doc’s B.R. Others, Inc, 826 F.2d 837, 847 (9th Cir. 1987). Within the context of a trademark suit, the rationale behind an unclean hands defense is that, “when the owner of a trade-mark applies for an injunction . . . it is essential that the plaintiff should not in his trade-mark . . . be himself guilty of any false or misleading representation.” Clinton E. Worden & Co. v. Cal. Fig. Syrup Co., 187 U.S. 516, 528
Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 9 of 13 Page ID #:10555
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Date
May 12, 2015
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
(1903). To succeed on an unclean hands defense, a trademark defendant “must show that [the] plaintiff used the trademark to deceive customers” and did so with bad intent. Japan Telecom, Inc. v. Japan Telecom Am. Inc., 287 F.3d 866, 870 (9th Cir. 2002) (“Bad intent is the essence of the defense of unclean hands”) (citations omitted). Here, because Plaintiff has shown a likelihood of prevailing on the merits of the trademark cause of action, the Court must determine whether McMurray has “demonstrated that [he is] likely to succeed in proving [his] unclean hands defense.” See Demarest v. Quick Loan Funding, Inc., 2009 WL 940377, *7 (C.D. Cal. 2009); Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1158 (9th Cir. 2007) (stating that, at a preliminary injunction stage, once a plaintiff “has shown a likelihood of success on the merits, the burden shifts to [the defendant] to show a likelihood that its affirmative defense will succeed”). i.
Analysis
McMurray contends that Plaintiff has unclean hands in the use of its trademark, “The Cochran Firm” because, although it markets itself to be a traditional, nationwide law firm, its structure reveals that it is, instead, a network of several partnerships that does not meet the definition of a law firm. Mot. 18:13-22:23. In opposition, Plaintiff argues that Plaintiff’s structure is not a major part of the tradename and, therefore, its “configuration cannot be misleading as a matter of law.” Opp. 3:17-23. Plaintiff’s is mistaken. In its Mandate, the Ninth Circuit made clear that “the structure of [Plaintiff’s business is important in assessing whether [Plaintiff] has unclean hands.” Mandate at 4. In fact, the Ninth Circuit noted that Plaintiff “may be misusing the trademark to deceive the public into believing it is a single, national firm, when in fact it is a network of separate partnerships.” Id. at 4-5. Here, Plaintiff does not contest that it advertises itself as a national law firm, and instead argues that this representation is not untrue. Opp. 4:5-7. After reviewing the evidence submitted by the parties, the Court concludes that McMurray has met his burden that he is likely to succeed in proving his unclean hands defense. As both parties agree, Plaintiff has been marketing itself as a traditional, national law firm with regional offices around the country, and at this point in the litigation, the evidence supports McMurray’s contention that Plaintiff’s relationship with its regional offices is composed of a network of several partnerships where the regional offices are only connected to each other 9
Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 10 of 13 Page ID #:10556
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Date
May 12, 2015
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
through their relationship with Plaintiff like the spokes of a wheel with Plaintiff in the center. As Defendant points out, Plaintiff’s own expert testified that he has no knowledge of any agreements among Plaintiff’s purported regional offices and that The Cochran Firm is a “network of partnerships between Cochran National and the regional entities.” TR 60:11-61:11; Steele Decl. ¶ 19. Plaintiff writes that Defendant has not met his burden that it has unclean hands by marketing itself as a national firm because Defendant’s expert “did not perform a survey of the public to determine what their understanding of the term ‘national firm’ is.” Opp. 8:19-26. This is not fatal to Defendant’s motion at this point in litigation. First, as the Ninth Circuit implied, the phrase “national firm” does not connote a “network of separate partnerships.” See Mandate at 4-5 (“Specifically, [Plaintiff] may be misusing the trademark to deceive the public into believing it is a single, national firm, when in fact it is a network of separate partnerships.”). Second, both parties substantially agree on the qualities that the public would expect from a “national firm.” For example, Defendant writes that a consumer would expect that a national law firm would have “the expertise of several hundred lawyers, experience, prestige, the resources of a multi-state institution, and, perhaps most importantly, financial stability.” Mot. 18:26-28. Plaintiff lists the following factors that “clients could reasonably expect from a national firm”: (1) nation-wide recognition and prestige; (2) large collective experience in a variety of subject areas; (3) nation-wide standardized resources and procedures; (4) the ability of clients to collect if something does go wrong; (5) vetting; and (6) control. Opp. 8:19-10:17. The Court does not doubt that The Cochran Firm and its regional office have prestige by use of Plaintiff’s trademark, but is not so sure that client of the regional offices have the benefit of large collective experience. Although regional offices all have access to the same client management system, there is no other evidence of communication across the different regional offices other than the fact that sometimes multiple office engage in class or multi-district litigation. See Opp. 6:1-4. Furthermore, although Plaintiff points out that it provides certain services to the regional offices – accounting, letterhead materials, assistance with HR and legal issues, and the client services center – perhaps standardizing certain elements of the regional offices, testimony by Plaintiff’s principal, Headland, and the operating agreements with the different regional offices shows that the regional offices shoulder most of the expenses associated with running the regional offices. See Headland Depo. 9:1-25; Cherry Decl., Exs. A-Q. Plaintiff agrees with Defendant that one “would expect that an office or attorney of a national firm would be better able to pay should malpractice occur” and argues that because it requires, under its operating agreements with the regional offices, that they maintain a minimum
Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 11 of 13 Page ID #:10557
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Date
May 12, 2015
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
amount of insurance, it meets this expectation. Opp. 9:13-21. Plaintiff fails to address, however, what happens when that regional office insurance fails to provide adequate relief. See Reply 11:2-4. As the example of Jackson’s attempt to collect a judgment from Plaintiff, described above, Plaintiff and its regional offices present themselves as one firm during some instances, but also make clear that they are not connected when it comes to certain liability. See Henriks, Exs. 6-8. Lastly, the evidence of vetting – that the regional offices are managed by a managing partner that Johnnie Cochran knew – and of control over the regional offices – the requirement that they use the same case management software, the tracking of the office’s statute of limitations, and the requirement that the regional offices comply with Plaintiff’s National Operating Procedures – do not convince the Court that Plaintiff operates as a single national firm, as opposed to a franchisor that wants to protect its trademark. Defendant has met his burden that Plaintiff has unclean hands in the use of its trademark by advertising itself as a national law firm when there is no evidence that the individual offices are connected other than through agreements with Plaintiff. Defendant also argues that Plaintiff does not even meet the definition of a law firm. Mot. 21:20-22:23. Having found that Plaintiff has unclean hands in its use of The Cochran Firm trademark, the Court does not need to engage in this analysis. However, the Court does so to emphasize its concern that Plaintiff is deceiving the public when it presents itself as “America’s Law Firm.” Dkt. # 58-7. Although Plaintiff is correct that the definitions of a firm provided under California law by the California Rules of Professional Conduct are not necessarily the definitions that a public would attach to the term, the Court finds them informative. After all the Rules of Professional Conduct are there, in part, to protect the public. See Cal. Rules of Prof. Conduct 1-100(A) (the purpose and function of the rules is “to protect the public and to promote respect and confidence in the legal profession”); see also In re Complex Asbestos Litig., 232 Cal. App. 3d 572, 586 (1991) (writing that the paramount concern in the need to maintain the ethical standards of professional responsibility “must be the preservation of public trust in the scrupulous administration of justice and the integrity of the bar”). The parties dispute whether The Cochran Firm, together with its regional offices, meets the definition of a law firm found in Rule1-100(B)(1)(a) of the California Rules of Professional Conduct. See Mot. 21:20-22:23; Opp. 5:22-8:9. Under this rule, a “law firm” is defined as: “two or more lawyers whose activities constitute the practice of law, and who share its profits, expenses, and liabilities.” Cal. Rules Prof. Conduct 1-100(B)(1)(a). 11
Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 12 of 13 Page ID #:10558
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Date
May 12, 2015
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
Here, as Plaintiff points out, Plaintiff is entitled to certain profits made by the regional offices under its operating agreements with them. Opp. 5:27-28. More importantly, however, there is no evidence of regional offices sharing profits with each other, unless, as Plaintiff points out, they engage in multi-district litigation or participate in class actions together, which is often done by different law firms. Id. 5:28-6:4. In terms of expenses, the evidence shows that while the regional offices are responsible for most operating expenses, Plaintiff provides them with certain services (accounting, certain advertising products, IT help, and web site management). Id. 6:5-8:3. Therefore, it does appear that Plaintiff is sharing expenses with each local office although, again, there is no evidence that the shared office share expenses with each other. Lastly, Plaintiff argues that it “tracks statutes of limitations,” but fails to explain how it, therefore, shares liability with the regional offices. Id. 8:5-9. That Plaintiff is “regularly named as a Defendant” when clients sue for malpractice does not mean that it is sharing liabilities with the local offices. Id. It does imply, however, that clients believe that Plaintiff and its regional offices are one firm. In assessing whether Plaintiff meets the definition of a law firm under the California Rules of Professional Conduct, the Court finds that while it may be unclear whether Plaintiff and each regional office can constitute a law firm, Plaintiff, together with all of the individual regional offices do not fit this definition. ii.
Defendant’s Unclean Hands
Plaintiff argues that Defendant cannot bring the unclean hands defense because Defendant, too, comes to the Court with tainted hands. First, Plaintiff argues that McMurray’s use of The Cochran Firm trademark “to deceive the public into believing that he is still part of The Cochran Firm” and his participation in Plaintiff’s structure for years constitutes unclean hands and bar him from relief. Opp. 10:20-12:3. The Court finds that Plaintiff’s mere allegations are not sufficient to bar relief in this instance. Furthermore, even if the allegations were true, after considering all of the evidence before the Court, it finds that Defendant is likely to succeed under the doctrine equity as, at this stage in litigation, the evidence shows Plaintiff to be more culpable. Accordingly, the Court finds that McMurray has met his burden of showing a likelihood of success that Plaintiff has unclean hands in the use of The Cochran Firm trademark and is not entitled to injunctive relief. V.
Conclusion
Case 2:12-cv-05868-PSG-MRW Document 364 Filed 05/12/15 Page 13 of 13 Page ID #:10559
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No.
CV 12-5868 PSG (MRWx)
Date
May 12, 2015
Title
The Cochran Firm, P.C. v. The Cochran Firm Los Angeles, LLP, et al.
For the reasons stated above, the Court GRANTS Defendants’ motion for an order dissolving the preliminary injunction. Therefore, the preliminary injunction is DISSOLVED. Plaintiff’s bond is exonerated. IT IS SO ORDERED.
13
