FILED
NOT FOR PUBLICATION
FEB 29 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
COCHRAN FIRM, P.C., The, an Alabama No. 15-55816
corporation,
D.C. No. 2:12-CV-05868-PSG-
Plaintiff-counter-defendant - MRW
Appellant,
And MEMORANDUM*
SAMUEL A. CHERRY; et al.,
Counter-defendants -
Appellants,
v.
COCHRAN FIRM LOS ANGELES LLP,
The, a California Limited Liability
Partnership,
Defendant,
And
RANDY H. MCMURRAY, P.C., a
California professional corporation; et al.,
Defendants-counter-claimants
- Appellees,
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
DUNN LAW APC; et al.,
Counter-defendants -
Appellees.
Appeal from the United States District Court
for the Central District of California
Philip S. Gutierrez, District Judge, Presiding
Argued and Submitted December 7, 2015
Pasadena, California
Before: PREGERSON, D.W. NELSON, and CALLAHAN, Circuit Judges.
Judges PREGERSION and D.W. NELSON writing:
The Cochran Firm, P.C. (Firm) and counter-defendants Samuel A. Cherry, J.
Keith Givens, and Barvie Koplaw appeal the district court’s order dissolving the
preliminary injunction obtained against Randy H. McMurray, P.C. and Randy H.
McMurray (McMurray). We have jurisdiction under 28 U.S.C. § 1292(a)(1), and
we affirm.
1. The district court did not err in dissolving the preliminary injunction based
on the Firm’s unclean hands. Though the district court’s order never explicitly
states a specific finding on bad intent, the court did not ignore this element. Before
launching into its analysis of the unclean hands defense, the district court
acknowledged that part of its burden as the trier of fact was to assess whether the
2
Firm had acted in bad faith. It quoted Japan Telecom, Inc. v. Japan Telecom Am.
Inc., 287 F.3d 866, 870 (9th Cir. 2002)), writing that “[t]o 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,” and “‘[b]ad intent is
the essence of the defense of unclean hands.’” The court later wrote that
McMurray had satisfied its burden, thus clearly implying that McMurray had
indeed demonstrated that the Firm acted with bad intent. The district court also
considered evidence of actual deception of consumers, such as when a former
client attempted to obtain a judgment against the Firm. See TrafficSchool.com, Inc.
v. Edriver Inc., 653 F.3d 820, 834 (9th Cir. 2011).
Nor did the district court ignore the assessment of whether the Firm’s
misconduct had an “immediate and necessary relation to the equity [it] seeks.” See
S. Cal. Darts Ass’n v. Zaffina, 762 F.3d 921, 932 (9th Cir. 2014) (quoting Keystone
Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 245 (1933)). Previously, this
Court remanded this case to the district court with instructions stating:
The structure of [the Firm’s] business is important in assessing whether [the
Firm] has unclean hands. Specifically, [the Firm] 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. Because the record
before us does not provide sufficient information about the relationships
both between [the Firm] and the local offices, or between [the Firm] and the
3
public, we remand to the district court to determine whether [the Firm] has
unclean hands in its use of the Cochran Firm trademark.
Read as a whole, this instruction implies that the issue of unclean hands is
immediately and necessarily related to the equity the Firm seeks. It was not
unreasonable for the district court to rely on this Court’s instruction as reflecting
that the “immediate and necessary relation” element as having already been
satisfied, and this reliance was not reversible error.
Finally, the district court did not abuse its discretion in using as an
informative guide California’s Rules of Professional Conduct’s definition of a law
firm, or finding expert testimony regarding the definition to be relevant. This
definition was merely helpful to the district court and use of it as a guide was not
reversible error.
2. Appellants argue that McMurray’s own unclean hands bar McMurray from
raising an unclean hands defense. The district court, however, did not err in
finding otherwise. The court did not abuse its discretion in finding that there was
insufficient evidence to support Appellants’ argument, and even if there were
sufficient evidence, that the Firm has been more culpable than McMurray.
3. Finally, during this appeal, McMurray filed a motion for sanctions against
the Firm. The motion for sanctions is denied.
4
AFFIRMED. MOTION FOR SANCTIONS DENIED.
5
FILED
Cochran Firm P.C. v Cochran Firm Los Angeles LLP et al 15-55816
FEB 29 2016
Callahan, Circuit Judge, dissenting: MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
The Cochran Firm, P.C. (the Firm) obtained a preliminary injunction against
Randy McMurray, a former partner of Johnnie Cochran, Jr., barring him from
infringing the Firm’s right to the “The Cochran Firm” trademark. The district
court later dissolved the injunction, however, on the ground that the Firm has
unclean hands in advertising itself as a “single firm” that is “national” in reach.
That McMurray infringed the trademark is no longer at issue. Rather, this case has
lost its way and become mired in the metaphysics of what makes a law firm
“single” and “national.”
I dissent because The Firm’s marketing is not misleading and has little to do
with the trademark at stake. In holding otherwise, the district court misunderstood
the unclean hands defense’s limited breadth. The effects of our failure to correct
this case’s wayward course are alarming. Multi-office businesses will be surprised
to learn that they are misleading the public by advertising themselves as “single”
and “national” in stature, and thus may not protect any right they hold to their
company’s name. The bench and bar will also be surprised to learn that a judge
can federalize one definition of “law firm” in deciding a trademark infringement
case. If the district court does not right its understanding and application of the
1
unclean hands defense, this case may have an interesting future indeed.
I.
The unclean hands defense has an increasingly limited scope in trademark
infringement suits. Although an established defense, it is disfavored, particularly
in suits like this one seeking to enjoin activity that is harmful the public. See
Republic Molding Corp. v. B.W. Photo Utils., 319 F.2d 347, 350 (9th Cir. 1963)
(“In the interests of right and justice the court should not automatically condone
the defendant’s infractions because the plaintiff is also blameworthy, thereby
leaving two wrongs unremedied and increasing the injury to the public.”);
McCarthy on Trademarks & Unfair Competition § 31:53 (hereinafter McCarthy)
(“It is better to remedy one wrong than to leave two wrongs at large.”). To prevail
on the defense in a trademark infringement action, a defendant must demonstrate
by “clear, convincing evidence” that (1) plaintiff’s conduct is inequitable and (2)
the misconduct relates to the subject matter of plaintiff’s trademark infringement
claim. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 833 (9th Cir. 2011).
For a plaintiff’s false advertising to meet the first, “inequitable” requirement,
a “defendant must show that plaintiff used the trademark to deceive consumers.”
Perfumebay.com Inc., v. eBay Inc., 506 F.3d 1165, 1177 (9th Cir. 2007). This
demands a showing of “bad intent,” which “is the essence of the defense of
2
unclean hands.” Id.; Dollar Sys., Inc. v. Avcar Leasing Sys., Inc., 890 F.2d 165,
173 (9th Cir. 1989). “[T]he extent of actual harm caused by the conduct in
question, either to the defendant or to the public interest, [also] is a highly relevant
consideration” in assessing whether the “inequitable” requirement is met. Republic
Molding, 319 F.2d at 349–50. Thus, even where bad intent is demonstrated, an
appreciable number of consumers must also have actually been deceived for the
defense to succeed. TrafficSchool.com, 653 F.3d at 834 (requiring “evidence of
actual deception caused by plaintiffs’ advertising”). Indeed, some courts have
demanded “clear, convincing evidence of ‘egregious’ misconduct before invoking
the doctrine of unclean hands.” Citizens Fin. Grp., Inc. v. Citizens Nat’l Bank of
Evans City, 383 F.3d 110, 129 (3d Cir. 2004) (emphasis added); see also, e.g., Pom
Wonderful LLC v. Welch Foods, Inc., 737 F. Supp. 2d 1105, 1113–16 (C.D. Cal.
2010) (collecting cases), aff’d, 468 Fed. Appx. 688 (9th Cir. 2012). This standard
makes sense—the showing required for trademark infringement to continue
unchecked due to a plaintiff’s advertising must be more stringent than the showing
required for that plaintiff to be found liable for a false-advertising counterclaim.
To meet the second requirement, a defendant must show that the plaintiff’s
“misdeeds . . . have an immediate and necessary relation to the equity that [the
plaintiff] seeks in respect of the matter in litigation.” S. Cal. Darts Ass’n v.
3
Zaffina, 762 F.3d 921, 932 (9th Cir. 2014); see also Seller Agency Council, Inc. v.
Kennedy Ctr. for Real Estate Educ., Inc., 621 F.3d 981, 986 (9th Cir. 2010)
(requiring that “the alleged misconduct . . . relate directly to the transaction
concerning which the complaint is made”). This requirement generally is met
where the trademark sought to be protected is itself misleading. For example, the
Supreme Court held that the laxative name “Syrup of Figs” was unprotectable
where the product contained no figs or fig juice. Worden v. Cal. Fig Syrup Co.,
187 U.S. 516, 539–40.1 Where the trademark does not itself make a misleading
assertion but is used as part of misleading advertising, the requisite relation is
much less likely to be found. “In such cases, almost all courts have narrowly
drawn the limits of the scope of the ‘subject matter’ of the case so as to rule out
unclean hands.” 6 McCarthy § 31:51.2 The requisite relation also exists where “a
1
See also Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 494
(1942) (“[E]quity will deny relief for infringement of a trademark where the
plaintiff is misrepresenting to the public the nature of his product either by the
trademark itself or by his label.”); Holzapfel’s Compositions Co. v. Rahtjen’s Am.
Composition Co., 183 U.S. 1, at 8 (1901) (“A symbol or label claimed as a
trademark, so constituted or worded as to make or contain a distinct assertion
which is false, will not be recognized, nor can any right to its exclusive use be
maintained.”); 6 McCarthy at § 31:50.
2
See Fuddruckers, Inc. v. Doc’s B.R. Others, Inc., 826 F.2d 837, 847
(9th Cir. 1987) (plaintiff’s deceptive marketing of its hamburger meat as “ground
steak” did not bar trade dress infringement suit); Tveter v. AB Turn-O-Matic, 633
F.2d 831, 839 (9th Cir. 1980) (plaintiff’s use of “patent pending” in connection
4
plaintiff . . . has dirtied his hands in acquiring the right presently asserted.” Seller
Agency Council, 621 F.3d at 986.
In sum, unclean hands rarely forecloses injunctive relief in an otherwise
meritorious trademark infringement action. In essence, our case law holds: Where
a plaintiff’s alleged misconduct involves false advertising, the defense succeeds
only if the defendant shows by clear, convincing evidence that (1) the trademark
itself makes a false or misleading statement that the plaintiff knows to be
misleading and that has actually deceived consumers; or (2) the plaintiff uses the
trademark as a central part of egregiously misleading marketing that the plaintiff
knows to be misleading and that has actually misled consumers.
II.
The district court dissolved the injunction against McMurray’s infringement
of The Cochran Firm trademark because it found that the Firm had dirtied its hands
by making two advertising statements: (1) that it is “national” and (2) that its
offices are part of a “single” law firm. As explained below, the district court erred.
A.
The district court failed to make findings regarding two central requirements
with the trademark when no patent application was on file did not bar claims for
trademark infringement and unfair competition).
5
of the unclean hands defense. First, the court failed to make findings necessary to
establish the “inequitable” requirement. While the court noted that bad intent is an
element of the unclean hands defense, it did not find that the Firm acted in bad
faith in advertising itself as a single, national law firm. Moreover, the court did not
find any actual deception or even acknowledge that such a showing is required.
Second, the district court did not find that the Firm’s marketing has an
“immediate and necessary relation” to the equity that the Firm seeks—that being to
stop McMurray from trading on the Firm’s goodwill and deceiving the public into
believing that he is still a part of The Cochran Firm. Invoking the “abuse of
discretion” standard of review, the majority excuses this absence by finding that
our previous decision remanding “for the district court to augment the record and
to reconsider [McMurray’s] unclean hands argument,” somehow, sub silentio and
without the record deemed required, found the requirement met. See Cochran
Firm, P.C. v. Cochran Firm Los Angeles, LLP, 572 F. App’x 491, 493 (9th Cir.
2014). Even assuming that the district court so understood our decision, which it
did not indicate, whether “the issue has already been decided explicitly or by
necessary implication” is a question of law that is reviewed de novo, not for abuse
of discretion. United States v. Lummi Nation, 763 F.3d 1180, 1185 (9th Cir. 2014).
Our previous memorandum disposition remanding for the district court to augment
6
the record and assess the unclean hands defense did not make any law of the case.
Rodriguez v. Robbins, 804 F.3d 1060, 1080–81 (9th Cir. 2015) (conclusions made
at the preliminary injunction stage are not law of the case if they do not implicate
“pure issues of law” or were “made hastily and on less than a full record”).
The absence of these findings and the district court’s apparent
misunderstanding of the applicable legal standard merit a remand. However,
because the record and the findings of the district court are “sufficiently
comprehensive and pertinent to the issues to provide a basis for decision,” FTC v.
Enforma Natural Products, Inc., 362 F.3d 1204, 1212 (9th Cir. 2004), I would
reach the merits and vacate dissolution of the preliminary injunction.
B.
The preliminary injunction should not have been dissolved because
McMurray has not demonstrated a likelihood of success on the merits of his
unclean hands defense with respect to either of the Firm’s allegedly misleading
advertising statements. Each advertising statement is addressed in turn below.
1.
With respect to the Firm’s “single firm” advertising, even if the “immediate
and necessary relation” requirement were met, the advertising is not sufficiently
7
“inequitable” to bar relief.3
The record does not support a finding that McMurray can demonstrate by
clear, convincing evidence that the Firm’s “single firm” branding is misleading,
much less egregiously so and undertaken with bad intent. “Reactions of the public
[to allegedly misleading advertisements] are typically tested through the use of
consumer surveys.” Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1140
(9th Cir. 1997); see 5 McCarthy § 27:55. While “full-blown consumer surveys to
prove actual consumer confusion” may not be “required at the preliminary
injunction stage,” Abbott Labs. v. Mead Johnson & Co., 971 F.2d 6, 15 (7th Cir.
1992), where a trademark is not itself clearly misleading, courts should demand at
least some comparable evidence of consumer deception.4 See TrafficSchool.com,
653 F.3d at 834. No such evidence has been presented. McMurray has not, for
example, offered a declaration showing that one consumer, let alone an appreciable
3
The Firm’s marketing of itself and its regional offices as a “single”
law firm is likely to bear an “immediate and necessary relation” to the equity the
Firm seeks. Given the singular form of the noun “firm,” “The Cochran Firm”
trademark suggests that all practices bearing that mark are part of a single firm.
4
This is not to say that consumer surveys should be required by district
courts evaluating an unclean hands defense. To the contrary, consumer surveys
should rarely, if ever, be necessary. This is because only egregiously misleading
marketing featuring the trademark or trademarks that themselves make misleading
statements may support an unclean hands defense.
8
number of them, has been misled.5 This is fatal to the defense. TrafficSchool.com,
653 F.3d at 834.
In finding otherwise, the district court relied exclusively on California’s
Rules of Professional Conduct for lawyers to inform its understanding of how the
public understands the term “law firm.” This was error for two reasons.
First, the fact that a particular State’s rules of professional conduct are
intended to protect the public in no way establishes that the public’s understanding
of “law firm” comports with the definition set forth in that State’s rules. Indeed,
the definitions of “law firm” set forth in California’s Rule and the ABA’s Model
Rules are not prohibitions. Rather, they are relevant to determining the existence
of conflicts of interest and the applicability of other professional responsibilities.
Second, even if rules of professional conduct for lawyers were relevant,
McMurray has not shown that the Firm’s hub-and-spoke structure is contrary to
any rule. The Firm’s structure is consistent with Rule 1.0(c) of the ABA Model
Rules, which broadly states that “firm” or “law firm” “denotes a lawyer or lawyers
5
The majority apparently believes that the fact that a lawyer for a
former client’s conservator named the Firm as a defendant in a lawsuit seeking to
recover a judgment is evidence that the former client was misled by the firm’s
advertising. The litigation tactic of the former client’s conservator’s lawyer plainly
does not show that the former client herself was misled by any aspect of the Firm’s
advertising. In any case, the district court mentioned this judgment in connection
with the Firm’s “national” branding, not its “single firm” branding.
9
in a law partnership, professional corporation, sole proprietorship or other
association authorized to practice law.” The comment on this rule demonstrates
that the definition is intended to be expansive and flexible so as to better protect
the public by minimizing conflicts of interest. Indeed, an ABA opinion expressly
condones, “at least from the ethical point of view,” the franchise-like “licensing” of
a law firm’s name “to create a national network of firms, all of which will use the
original firm’s name under a licensing agreement by which the original firm will
provide all marketing for the firms in the network.” ABA Op. 94-388 at 7.6 The
California Practice Guide to Professional Responsibility similarly provides that
franchising of a law firm’s name is permissible where “the franchisor is in a
partnership with each franchisee.” Cal. Prac. Guide Prof. Resp. Ch. 2-B at § 136.2
(citing Los Angeles Bar Ass’n Form. Op. 423 (1983)). The Firm complies with
this guidance. As the district court found, “Plaintiff’s relationship with its regional
offices is composed of a network of several partnerships.”
The Firm’s hub-and-spoke structure also is consistent with California’s Rule
of Professional Conduct 1-100(B)(1), which provides that a “law firm” is, among
6
The ABA rules committee opined that such a structure is permissible
for ethics purposes “[i]f all of the lawyers in the participating firms in a ‘network’
of licensed firms using the same name meet all of the ethical requirements that
would be applicable to them if they were all lawyers in a single firm.” Id. at 8.
10
other things, “two or more lawyers whose activities constitute the practice of law,
and who share its profits, expenses, and liabilities.” The district court itself found
that the Firm and its regional offices have each of these characteristics to some
degree, as well as characteristics of a “national” firm. The court found that the
Firm has nationwide “prestige”; coordinates across offices on class actions and
multi-district litigation; has numerous nation-wide standardized resources and
procedures; requires regional offices to carry liability insurance;7 vets employees
and ensures “that the regional offices are managed by a managing partner that
Johnnie Cochran knew”; and exerts a degree of “control over the regional offices.”
2.
With respect to the Firm’s “national” branding, neither the “inequitable” nor
the “immediate and necessary relation” requirement of the unclean hands defense
is met. McMurray has not shown that this advertising is misleading. Indeed, as
noted, the district court itself found that the Firm has many characteristics of a
“national” presence. In any case, there is no evidence in the record of actual
7
Operating agreements between the Firm and its regional offices
provide for shared liability. The operating agreement for the New York office, for
example, states that the “Parties will indemnify each other (and each of such
Party’s affiliates, officers, attorneys or agents) from and against all loses, damages
or claims . . . incurred in connection” with the practice, except “each Party
Attorney will be solely responsible for his or her own malpractice, for which such
Party Attorney will be protected by professional liability insurance coverage.”
11
consumer confusion or bad intent.
Even if the “national” branding were inequitable, the Firm’s conduct is not
directly related to the equity the Firm seeks. The Cochran Firm trademark does not
itself state that law offices bearing that mark are “national” in stature. Rather, such
branding is buried in websites and legal magazines. In these circumstances, an
unclean hands defense will not succeed. See 6 McCarthy § 31:51.
In sum, the record and the district court’s own findings show that McMurray
is unlikely to be able to prove by clear, convincing evidence that the Firm’s
advertising is sufficiently inequitable and related to the equity that the Firm seeks
to allow McMurray’s trademark infringement to continue.
III.
The district court’s decision has two alarming effects. First, in finding the
Firm’s advertising to be misleading, the district court implicitly federalizes one
definition of “law firm.” This not only intrudes on the domain of States, which
may define “law firm” as they see fit,8 but harms the public. The public interest is
8
In Washington, D.C., for example, a business owned and controlled
by non-lawyers can be a law firm. And in California and four other States, a law
firm can be made up of people who did not go to law school. I note that this case
does not present the question of whether, under California or any other State’s
professional rules, non-lawyers may share in the profits of a law firm by way of
payments for a trademark license.
12
better served by an expansive definition of “law firm,” which ensures wider
applicability of conflict-of-interest rules and other professional responsibilities.
Second, if the Firm’s hub-and-spoke structure is not a “single firm,” then the
organizational structures of many prominent, international firms are called into
question. For example, the Firm’s expert states that DLA Piper, Baker &
McKenzie, Dentons, Hogan Lovells, Squire Sanders, and other firms are Swiss
vereins, which are organizations composed of member organizations. The Firm’s
hub-and-spoke structure is also used by other “law firms,” such as Jacoby and
Meyers. The closeness of bonds between the offices that comprise a firm varies
significantly by office and firm. It does not follow that regional offices that
operate more independently mislead the public or violate rules of professional
conduct by holding themselves out as part of a larger, single law firm.
I would vacate the district court’s order dissolving the preliminary injunction
and put this trademark infringement case back on its proper course.
13