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Axon Enterprise Incorporated v. Vievu LLC

United States District Court, D. Arizona

January 5, 2018

Axon Enterprise Incorporated, Plaintiff,
v.
Vievu LLC, Defendant.

          ORDER

          Douglas L. Rayes United States District Judge

         Plaintiff Axon Enterprise, Inc. alleges that its competitor, Defendant Vievu LLC, violated the Lanham Act by using deceptive advertising and fraudulently concealing defects in its products to obtain sales contracts. (Doc. 1.) Before the Court is Defendant's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 14.) The motion is fully briefed, and the Court heard oral argument on November 14, 2017. (Docs. 23, 24, 48, 52, 53, 55.) For the following reasons, Defendant's motion is denied.

         BACKGROUND

         This case is the third in which Plaintiff has complained about the manner in which Defendant advertises its products. On February 27, 2017, Plaintiff filed two lawsuits against Defendant. Plaintiff filed the first in California Superior Court and alleged violations of the California Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200, and the California False Advertising Law (FAL), Cal. Bus. & Prof. Code § 17500 (“California Action”). Plaintiff filed the second in Arizona Superior Court and alleged violations of the Arizona Consumer Fraud Act (ACFA), A.R.S. §§ 44-1521 et seq., and the Lanham Act, 15 U.S.C. §1125(a)(1)(B) (“Arizona Action”).

         On May 26, 2017, Plaintiff dismissed the California and Arizona actions and filed this case, which raises only a Lanham Act claim and implicates Defendant's representations in Arizona, California, Florida, and New York (“Federal Action”). (Doc. 1 ¶¶ 57-106.) Plaintiff's actions took place in a matter of minutes-the California Action was dismissed at 2:48 P.M., the Federal Action was filed at 2:52 P.M., and the Arizona Action was dismissed at 3:03 P.M.

         All three actions share the same general allegation that Defendant made misrepresentations in the sale of its LE4 body-worn cameras. (Doc. 1 ¶ 1; Doc. 14-3 ¶ 1; Doc. 14-4 ¶ 1.) Specifically, Plaintiff alleges that Defendant misrepresented its camera captures “30 frames per second” and has a twelve hour battery life, when in actuality the camera captures fewer frames and has a shorter battery life. (Doc. 1 ¶ 1.) Plaintiff claims that Defendant induced city and county entities to purchase its cameras rather than Plaintiff's by underbidding and misrepresenting its product. (¶ 57.)

         LEGAL STANDARD

         A successful Rule 12(b)(6) motion must show that the complaint lacks a cognizable legal theory or fails to allege facts sufficient to support such a theory.[1] See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). Defendant contends that Plaintiff's voluntary dismissal of the Arizona Complaint operated as an adjudication on the merits of the Lanham Act claim under Arizona Rule of Civil Procedure 41(a)(1)(B), and therefore the Federal Complaint lacks a cognizable legal theory because it is barred by res judicata.

         Under Arizona's rules of civil procedure, a plaintiff may voluntarily dismiss an action “by filing a notice of dismissal before the opposing party serves either an answer or a motion for summary judgment, ” or “by order based on a stipulation of dismissal signed by all parties who have appeared.” Ariz. R. Civ. P. 41(a)(1)(A). “Unless the notice or order states otherwise, the dismissal is without prejudice. But if the plaintiff previously dismissed an action in any court based on or including the same claim, a notice of dismissal operates as an adjudication on the merits.” Ariz. R. Civ. P. 41(a)(1)(B). This provision is substantially similar to Fed.R.Civ.P. 41(a), and commonly is referred to as the “two dismissal” rule. Commercial Space Mgmt. Co. v. Boeing Co., 193 F.3d 1074, 1076 (9th Cir. 1999) (interpreting analogous federal rule). Defendant, as the party invoking the two dismissal rule, “bears the burden of proving applicability of the rule by a preponderance of the evidence.”[2] Randall v. Direct Buy, Inc., No. 4:09 CV 243 SNLJ, 2009 WL 4030533, at *3 (E.D. Mo. Nov. 19, 2009).

         DISCUSSION

         It is undisputed that Plaintiff voluntarily dismissed two cases sharing the same general allegations that Defendant falsely advertised its LE4 body-worn cameras: first the California Action, followed by the Arizona Action.[3] It also is undisputed that the Lanham Act claim at issue in the Federal Action is identical to the Lanham Act claim that Plaintiff voluntarily dismissed in the Arizona Action. The dispositive question is whether the California Action was based on or included the same Lanham Act claim, such that the voluntary dismissal of the Arizona Action operated as an adjudication of the claim on the merits.

         I. Definition of “Same Claim” in Ariz. R. Civ. P. 41

          For purposes of Rule 41, “the Court considers whether Plaintiff's claims are the same as those in the related actions under the res judicata analysis.” Thomas v. Wells Fargo Bank, N.A., C-13-02065 JSW, 2013 WL 5313458, at *2 (N.D. Cal. Sept. 23, 2013); Abrahms v. Hard Drive Prods., No. C-12-01006 JCS, 2012 WL 5499853, at *3 n.3 (N.D. Cal. Nov. 13, 2012) (“the Ninth Circuit has analogized the Rule 41(a)(1)(B) two dismissal rule to the res judicata inquiry”). When determining the preclusive effect of federal court judgments, federal courts apply the “transactional test, ” under which claims are deemed to be the “same” if they arise out of the same transaction or occurrence and “could conveniently be tried together.” Mpoyo v. Litton Electro-Optical Sys., 430 F.3d 985, 987 (9th Cir. 2005) (quotations and citation omitted).

         Federal courts look to state law, however, when determining the preclusive effect of a state court judgment. Intri-Plex Techs., Inc. v. Crest Grp., Inc., 499 F.3d 1048, 1052 (9th Cir. 2007). When determining the preclusive effect of a prior judgment, Arizona applies the “same evidence” test. Phx. Newspapers, Inc. v. Dep't of Corr., 934 P.2d 801, 804 (Ariz.Ct.App. 1997); see also Bishara v. U.S. Bank Nat'l Ass'n, No. 1 CA-CV 16-0176, 2017 WL 3484503, at *2 (Ariz.Ct.App. Aug. 15, 2017); Harris v. Ariz. Bd. of Regents, No. CV-16-04029-PHX-DGC, 2017 WL 3704694, at *3 (D. Ariz. Aug. 28, 2017). Under this “rather restrictive test, ” a subsequent action is barred “[i]f no additional evidence is needed to prevail in the second action than that needed in the first.” Phx. Newspapers, 934 P.2d at 804. “Two causes of action which arise out of the same transaction or occurrence are not the same for purposes of res judicata if proof of different or additional facts will be required to establish them.” E.C. Garcia and Co.,Inc. v. Ariz. Dep't of Revenue, 875 P.2d 169, 179 (Ariz.Ct.App. 1993). In this respect, “[t]he same ...


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