Aviva USA Corporation, an Iowa corporation; Aviva Brands Limited, a United Kingdom limited company, Plaintiffs,
Anil Vazirani, an individual; Vazirani & Associates Financial, LLC, an Arizona limited liability company; Secured Financial Solutions, LLC, an Arizona limited liability company; James Regan, an individual; Regan & Associates, LLC, an Arizona limited liability company, Defendants.
JAMES A. TEILBORG, Senior District Judge.
Pending before the Court are: Defendants Anil Vazirani, Vazirani & Associates Financial, LLC, Secured Financial Solutions, LLC (collectively the "Vazirani Defendants"), and James Regan and Regan & Associates, LLC's (collectively the "Regan Defendants") Motion for Attorneys' Fees (Doc. 241) and Plaintiffs' Motion to Amend the Clerk's Judgment (Doc. 243). The Court now rules on the motions.
Aviva is one of the largest insurance companies in the world and serves customers in the life insurance and annuity sector. Though the Vazirani Defendants once sold Aviva's life insurance and annuity products under an agreement with certain affiliates of Aviva, that relationship has been terminated. Defendant Anil Vazirani, Aviva, and other related parties are presently engaged in a series of legal disputes arising out of the termination of the contractual relationship between Mr. Vazirani and Aviva.
In the present lawsuit, Aviva's amended complaint alleged both federal and state claims of trademark infringement and racketeering. (Doc. 42). On May 10, 2012, the Court granted Defendants' Motion for Judgment on the Pleadings regarding the federal Racketeer Influenced and Corrupt Organizations Act ("RICO") claim. (Doc. 169). On October 2, 2012, the Court granted Defendants' Motion for Summary Judgment and entered judgment in favor of all Defendants on the remaining claims. (Doc. 237). Defendants now move for attorneys' fees pursuant to 15 U.S.C. § 1117(a) of the Lanham Act and Arizona Revised Statutes sections 13-2314.04(A) & (N).
A. Attorneys' Fees under the Lanham Act
Under the Lanham Act, "[t]he Court in exceptional cases may award reasonable attorney fees to the prevailing party." 15 U.S.C. § 1117(a). The Ninth Circuit construes the "exceptional" standard narrowly. Gracie v. Gracie, 217 F.3d 1060, 1071 (9th Cir. 2000). This requirement is met "when the non-prevailing party's case is groundless, unreasonable, vexatious, or pursued in bad faith." Id. (internal quotation marks omitted). "A case is not exceptional simply because the court granted summary judgment; otherwise, every Lanham Act case in which a summary judgment motion was granted would be considered an exceptional' case." Sand Hill Advisors, LLC v. Sand Hill Advisors, LLC, No. C 08-5016 SBA, 2010 WL 8500520, at *3 (N.D. Cal. Sept. 20, 2010). Furthermore, the prevailing party must provide "compelling proof" that the case is "exceptional." Applied Info. Sciences Corp. v. eBay, Inc., 511 F.3d 966, 973 (9th Cir. 2007).
Defendants argue that Aviva's Lanham Act claims were groundless, unreasonable, and vexatious because they dealt with "non-commercial First Amendment-protected speech" that criticized Aviva. (Doc. 241 at 3).
1. Groundless or Unreasonable
A claim is groundless or unreasonable if it fails to raise "debatable issues of law and fact." Stephen W. Boney, Inc. v. Boney Servs., Inc., 127 F.3d 821, 827 (9th Cir. 1997). A claim is legally groundless if there is "no legal basis for the claim itself, which instead rests on absurd or just short of frivolous contentions of law." Brown v. Elec. Arts, Inc., 722 F.Supp.2d 1148, 1152 (C.D. Cal. 2010). A claim is factually groundless if there is "no reasonable basis to believe in the factual allegations underlying the claim." Id.
Defendants allege that Aviva's suit is groundless because Aviva's purpose in initiating the suit was to harass Defendants and suppress their right to non-commercial free speech. (Doc. 247 at 9). Defendants further contend that the relief sought by Aviva was "overbroad" and that Aviva never attempted to gather evidence of consumer confusion. ( Id. at 10-11). Defendants argue that these deficiencies, along with the Court's grant of summary judgment in favor of Defendants, demonstrates that Aviva's claims were groundless and unreasonable.
Although the Court ultimately rejected Aviva's Lanham Act claims, that alone does not mean that Aviva's case was groundless or unreasonable. Aviva had a reasonable basis for claiming that Defendants' conduct violated the Lanham Act. Aviva has a protectable interest in its registered AVIVA mark and its trade dress. (Doc. 237 at 10). Defendants were using Aviva's mark and trade dress, and had registered four domain names referencing Aviva when Aviva filed the complaint, a number that increased to fourteen by the time the Court granted summary judgment. ( Id. at 5-6). Aviva's evidence of confusion consisted of users who experienced temporary confusion over the source of the website before realizing that it did not originate from Aviva. (Doc. 237 at 26). Although the Court found no infringement because Defendants' use of the mark was non-commercial, the claims were not groundless since Aviva presented evidence of confusion, though some of it was inadmissible hearsay testimony. ( Id. n.8). Furthermore, Aviva's decision not to conduct consumer surveys is not sufficient to prove that the claims are groundless. See CG Roxane, LLC v. Fiji Water Co., LLC, No. C-07-02258 RMW, 2008 WL 4542803, at *3 (N.D. Cal. Oct. 10, 2008) ("The plaintiff's failure to conduct consumer surveys or provide sufficient evidence for its claims does not mean the claims were unreasonable or groundless."). The fact that there was insufficient evidence to overcome Defendants' motion for summary judgment does not mean that the claims were groundless.
While the Court determined that Defendants' use of Aviva's mark was non-commercial, Aviva's assertions to the contrary were not groundless. The Court relied on Bosley Medical Institute, Inc. v. Kremer, involving a dissatisfied customer, not a competitor. 403 F.3d 672 (9th Cir. 2005). However, Aviva cited to persuasive authority in support of its argument that the challenged speech was commercial because a competitor's website used the plaintiff's trademarks. (Doc. 237 at 12). Moreover, Defendants acknowledge that they offer services in ...