Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-00500/USCOURTS-casd-3_09-cv-00500-2/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1125la Trademark Infringement (Lanham Act)

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

BAUER BROS. LLC, a California limited

liability company,

Plaintiff,

CASE NO. 09cv500-WQH-BGS

ORDER

vs.

NIKE, INC., an Oregon Corporation,

Defendant.

_____________________________________

NIKE, INC., an Oregon Corporation,

Counterclaimant,

 vs.

BAUER BROS. LLC, a California limited

liability company,

Counterdefendant.

 

HAYES, Judge:

The matters before the Court are (1) the Motion to Dismiss and Strike Amended

Counterclaims, filed by Plaintiff/Counterdefendant Bauer Bros. LLC (“Bauer”) (ECF No. 59);

and (2) the Motion to Stay Discovery Regarding Counterclaims for Fraud, filed by Bauer (ECF

No. 60).

I. Background

On March 12, 2009, Bauer initiated this action by filing a Complaint against Defendant

Nike, Inc. (“Nike”). (ECF No. 1). Bauer alleges it is the owner of registered trademarks for

“Don’t Tread on Me” and “DTOM” on apparel. Bauer alleges Nike sells apparel bearing

Bauer’s trademarks without Bauer’s authorization. The Complaint alleges causes of action for

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unfair competition pursuant to the Lanham Act, 15 U.S.C. § 1125, California’s Unfair

Competition Law, Cal. Bus. & Prof. Code § 17200, and common law.

On April 3, 2009, Nike filed an Answer and Counterclaims. (ECF No. 4).

On October 8, 2010, Nike filed Amended Counterclaims. (ECF No. 43). The Amended

Counterclaims allege that Bauer’s trademark registrations for “Don’t Tread on Me” and its

abbreviation, “DTOM,” were obtained from the U.S. Patent and Trademark Office through

fraud and should be cancelled pursuant to 15 U.S.C. §§ 1064 and 1119. Count I alleges:

7. On April 9, 2004, Bauer Bros. filed Application Serial No. 78/399,375

(the ‘’375 Application’) to register the alleged mark DON’T TREAD ON ME

with the U.S. Patent and Trademark Office (USPTO). The ‘375 Application was

based on Lanham Act Section 1(a) – use in commerce – claiming a first use date

of March 11, 2004. The ‘755 Registration matured from the ‘375 Application

and was issued by the USPTO on June 7, 2005.

8. The ‘375 Application and ‘755 Registration identify the following goods

upon which Bauer claimed to be using the DON’T TREAD ON ME mark as of

the filing date: ‘Apparel, namely, men, women and children’s apparel, namely,

... galoshes ... [and] ski bibs....’

9. The ‘375 Application, signed by Luke Bauer, a member of Bauer,

included a sworn statement pursuant to 37 C.F.R. § 2.20 as follows:

The undersigned, being hereby warned that willful false

statements and the like so made are punishable by fine or

imprisonment, or both, under 18 U.S.C. Section 1001, and that

such willful false statements, and the like, may jeopardize the

validity of the application or any resulting registration, declares

that he/she is properly authorized to execute this application on

behalf of the applicant; he/she believes the applicant to be the

owner of the trademark/service mark sought to be registered, or,

if the application is being filed under 15 U.S.C. Section 1051(b),

he/she believes applicant to be entitled to use such mark in

commerce; to the best of his/her knowledge and belief no other

person, firm, corporation, or association has the right to use

the mark in commerce, either in the identical form thereof or in

such near resemblance thereto as to be likely, when used on or in

connection with the goods/services of such other person, to cause

confusion, or to cause mistake, or to deceive; and that all

statements made of his/her own knowledge are true; and that

all statements made on information and belief are believed to

be true.

(Emphasis added).

10. Based upon Counter-claimant’s reasonable investigation, and on

information likely to be discovered during discovery in this action, Bauer was

not using ‘DON’T TREAD ON ME’ as a trademark in connection with each and

every one of the 115 items that Bauer included in its description of goods as of

either the filing date of the ‘375 Application or as of the issuance of the ‘755

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Registration. Such goods include, by way of example and not by way of

limitation, ‘ski bibs’ and ‘galoshes.’

11. On information and belief, Bauer knew that it was not using ‘DON’T

TREAD ON ME’ as a trademark in connection with one or more of the 115

items identified in its description of goods as of the filing date of the ‘375

Application.

12. On information and belief, Bauer’s statement that it was using the mark

‘DON’T TREAD ON ME’ in connection with all of the 115 items identified in

its ‘375 Application was a false misrepresentation of material fact, and

constitutes fraud on the U.S. Patent and Trademark Office.

13. Prior to claiming in the sworn statement that ‘no other person, firm,

corporation, or association has the right to use the mark in commerce,’ Bauer

was fully aware of the historical significance and origin of the phrase ‘Don’t

Tread on Me.’

14. Prior to claiming in the sworn statement that ‘no other person, firm,

corporation, or association has the right to use the mark in commerce,’ Bauer

was fully aware that third parties had used and were using the phrase ‘Don’t

Tread on Me’ on apparel.

15. In connection with the ‘375 Application, Mr. Bauer also attested that

‘The applicant is submitting or will submit one specimen for each class showing

the mark as used in commerce on or in connection with any item in the class of

listed goods and/or services.’ However, according to the USPTO TDR records,

no specimen of use is shown as filed with the U.S. Patent and Trademark Office

in connection with the Application.

16. Bauer’s statements of exclusivity and of its use on all of the goods listed

in the ‘375 Application and ‘755 Registration were both fraudulent and material.

Bauer made all of the foregoing misrepresentations with the intent to deceive the

USPTO so that it would rely on the misrepresentations and grant registration of

the ‘DON’T TREAD ON ME’ mark to Bauer. But for Bauer’s sworn statement,

the USPTO would not have issued a registration covering goods upon which the

mark had not been used, and separately, it would not have issued a registration

for a historical phrase over which Bauer cannot rightfully claim exclusive use

as a trademark. Ultimately, the USPTO reasonably relied on Bauer’s sworn

statements in determining Bauer’s rights to, and issuing, the ‘755 Registration

to Bauer.

17. In summary, Bauer procured the registration for the DON’T TREAD ON

ME mark by false means and/or by knowing and willfully making false and/or

fraudulent declarations or representations with the intent to deceive the USPTO.

Bauer knew at the time it filed its Section 1(a) application that its sworn

statements regarding exclusivity and scope of use were both false.

18. Moreover, Bauer has knowingly and willfully perpetrated its fraud and/or

misrepresentations to the USPTO by failing to amend its ‘755 Registration in the

face of Nike’s original counterclaim under Section 1119 and Nike’s petition to

cancel the ‘755 registration.

19. Nike has been damaged and will continue to be damaged by the ‘755

Registration, and Bauer has used that registration as a basis of its Complaint

against Nike.

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20. For the above reasons, the ‘755 Registration issued as a result of fraud

and should be canceled pursuant to 15 U.S.C. §§ 1064 and 1119.

(ECF No. 43 at 2-5). Count II contains similar allegations regarding “the alleged mark DTOM

(an abbreviation of ‘Don’t Tread on Me’),” except Count II does not allege that third parties

had used or were using “DTOM” on apparel. Id. at 5.

On December 3, 2010, Bauer filed the Motion to Dismiss and Strike Amended

Counterclaims pursuant to Federal Rules of Civil Procedure 9(b), 12(b)(6) and 12(f). (ECF

No. 59). Bauer contends:

Nike’s counterclaims asserted in the Amended Counterclaims, and each of them,

fail to state a claim upon which relief may be granted and are not pled with

particularity, and further, that the allegations in Paragraphs 8, 10-17, 23, 25-30

and 32 of the Amended Counterclaims, and Nike’s prayer for the recovery of

attorney fees, are redundant, immaterial, impertinent, are made in support of

inadequately pled claims, and/or are not recoverable as a matter of law.

(ECF No. 59-1 at 5). Bauer requests that the Amended Counterclaims and Nike’s prayer for

attorney fees be dismissed and/or stricken without leave to amend. 

On December 13, 2010, Bauer filed the Motion to Stay Discovery Regarding

Counterclaims for Fraud. (ECF No. 60). Bauer moves the Court for an order staying

discovery regarding Nike’s fraud claims until Nike files a counterclaim which alleges fraud

with the particularity required by the applicable rules.

On December 27, 2010, Nike filed an opposition to the Motion to Dismiss and Strike

Amended Counterclaims and the Motion to Stay Discovery Regarding Counterclaims for

Fraud. (ECF Nos. 61, 62). Nike contends that the Amended Counterclaims are properly pled

pursuant to the applicable rules and Nike’s attorney fees are potentially recoverable pursuant

to the Lanham Act. Nike contends that discovery should not be stayed, even if Bauer’s motion

to dismiss is granted because, inter alia, the disputed discovery requests are also relevant to

claims and defenses other than the fraud counterclaims.

On January 3, 2011, Bauer filed replies in support of the pending motions. (ECF Nos.

64, 65).

II. Discussion

A. Motion to Dismiss

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1. Standard of Review

Federal Rule of Civil Procedure 12(b)(6) permits dismissal for “failure to state a claim

upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). Dismissal under Rule 12(b)(6)

is appropriate where the complaint or counterclaim lacks a cognizable legal theory or sufficient

factual allegations to support a cognizable legal theory. See Balistreri v. Pacifica Police Dep’t,

901 F.2d 696, 699 (9th Cir. 1990). When considering a motion to dismiss, a court must accept

as true all “well-pleaded factual allegations.” Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937,

1950 (2009). “[F]or a complaint to survive a motion to dismiss, the non-conclusory factual

content, and reasonable inferences from that content, must be plausibly suggestive of a claim

entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009)

(quotations omitted).

For all allegations of fraud, Federal Rule of Civil Procedure 9(b) requires that “a party

... state with particularity the circumstances constituting fraud,” while “[m]alice, intent,

knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ.

P. 9(b). “Rule 9(b) demands that the circumstances constituting the alleged fraud be specific

enough to give defendants notice of the particular misconduct so that they can defend against

the charge and not just deny that they have done anything wrong. Averments of fraud must

be accompanied by the who, what, when, where, and how of the misconduct charged.” Kearns

v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (quotations omitted).

2. Analysis

The Amended Counterclaims seek cancellation of Bauer’s trademark registrations for

“Don’t Tread on Me” and “DTOM” pursuant to 15 U.S.C. §§ 1064 and 1119. Section 1119

gives the court the authority to order the cancellation of trademark registrations. “A third party

may petition to cancel a registered trademark on the ground that the ‘registration was obtained

fraudulently.’” In re Bose Corp., 580 F.3d 1240, 1243 (Fed. Cir. 2009) (quoting 15 U.S.C. §

1064(3)). “Fraud in procuring a trademark registration or renewal occurs when an applicant

knowingly makes false, material representations of fact in connection with his application.”

Id. (quotation omitted); see also Quiksilver, Inc. v. Kymsta Corp., 466 F.3d 749, 755 (9th Cir.

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 The Ninth Circuit has stated that the PTO’s Trademark Trial and Appeal Board 1

(“TTAB”) is an authority “whose expertise we respect and whose decisions create

expectations.” Grupo Gigante SA De CV v. Dallo & Co., Inc., 391 F.3d 1088, 1095 (9th Cir.

2004); see also Buti v. Perosa, S.R.L., 139 F.3d 98, 105 (2d Cir. 1998) (“We have noted on

many occasions that the decisions of the TTAB, while not binding within this Circuit, are

nonetheless to be accorded great weight.”) (quotation omitted).

- 6 - 09cv500-WQH-BGS

2006) (same).

The Amended Counterclaims allege fraud based upon the following statements made

by Bauer in the trademark applications at issue: (a) the statement that “no other person, firm,

corporation, or association has the right to use the mark in commerce,” and (b) “Bauer’s

statement that it was using the mark ... in connection with all of the 115 items identified in its

... Application.” (ECF No. 43 ¶¶ 12-14 (Count I), 27-28 (Count II)).

a. Statement that No Other Party Has the Right to Use the Mark

Nike alleges that Bauer’s statement that “to the best of his/her knowledge and belief no

other person ... has the right to use the mark in commerce” was a fraudulent misrepresentation

because “Bauer was fully aware of the historical significance and origin of the phrase,”

and–with respect to the phrase “Don’t Tread on Me”–“Bauer was fully aware that third parties

had used and were using the phrase ... on apparel.” Id. ¶¶ 13-14, 28.

The claim of fraud alleged by Nike requires the following:

To withstand a motion to dismiss, a plaintiff claiming that the declaration or oath

in the defendant’s application for registration was executed fraudulently, in that

there was another use of the same or a confusingly similar mark at the time the

oath was signed must allege particular facts which, if proven, would establish

that: (1) there was in fact another use of the same or a confusingly similar mark

at the time the oath was signed; (2) the other user had legal rights superior to

applicant’s; (3) applicant knew that the other user had rights in the mark superior

to applicant’s, and either believed that a likelihood of confusion would result

from applicant’s use of its mark or had no reasonable basis for believing

otherwise; and that (4) applicant, in failing to disclose these facts to the Patent

and Trademark Office, intended to procure a registration to which it was not

entitled.

Intellimedia Sports Inc. v. Intellimedia Corp., 43 U.S.P.Q.2d 1203, 1206 (Trademark Tr. &

App. Bd. 1997) (emphasis added). 

1

The Amended Counterclaims fail to allege the following: a specific person or entity

who previously used the phrase at issue on apparel; that “the other user had legal rights

superior to [Bauer]’s”; and that Bauer “knew that the other user had rights in the mark superior

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to [Bauer]’s.” Id.; see also Quiksilver, Inc. v. Kymsta Corp., 466 F.3d 749, 755 (9th Cir. 2006)

(“[T]he statement of an applicant that no other person ‘to the best of his knowledge’ has the

right to use the mark does not require the applicant to disclose those persons whom he may

have heard are using the mark if he feels that the rights of such others are not superior to his.”)

(quoting Yocum v. Covington, 216 U.S.P.Q. 210, 216-17 (Trademark Tr. & App. Bd. 1982));

Hana Fin., Inc. v. Hana Bank, 500 F. Supp. 2d 1228, 1235 (C.D. Cal. 2007) (allegation that

the applicant knew of counterclaimant’s prior use of the same mark is insufficient to satisfy

Rule 9(b) because “[m]ere knowledge of another’s actual use of the mark is insufficient to

constitute fraud”) (citing Quiksilver, 466 F.3d at 755). 

Nike has failed to offer any authority for the proposition that a trademark with historical

significance is not subject to registration. Even if Nike had done so, the Amended

Counterclaims do not allege with particularity “the historical significance and origin” of the

phrases at issue (ECF No. 43 ¶¶ 13, 28), nor do they allege that, because of that historical

significance, Bauer knew that no trademark could be rightfully issued as to the phrases at issue.

See Aureflam Corp. v. Pho Hoa Phat I, Inc., No. C-05-746, 2005 WL 2253813, at *3 (N.D.

Cal., Sept. 16, 2005) (allegations that applicant knew that “many restaurants us[e] the name

‘Pho Hoa’ as part or all of their name,” and “the name ‘Pho Hoa’ is commonly known by those

who share Vietnamese culture as generically designating a restaurant that serves pho”

constituted a “generalized statement of [the applicant]’s alleged knowledge containing

conclusions but without factual support does not rise to the level of particularity outlined in

Intellimedia Sports and required by Fed. R. Civ. Pro. 9(b)”). 

The Court concludes that the allegations of fraud related to Bauer’s statement that “to

the best of his/her knowledge and belief no other person ... has the right to use the mark in

commerce” are not alleged with the particularity required by Rule 9(b). As to these

allegations, the Motion to Dismiss the Amended Counterclaims is granted and the Amended

Counterclaims are dismissed without prejudice. Cf. Vess v. Ciba-Geigy Corp. USA, 317 F.3d

1097, 1108 (9th Cir. 2003) (“As with Rule 12(b)(6) dismissals, dismissals for failure to comply

with Rule 9(b) should ordinarily be without prejudice. Leave to amend should be granted

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unless the district court determines that the pleading could not possibly be cured by the

allegation of other facts.”) (quotation omitted).

b. Statement that the Mark Was Used with the Identified Items

The Amended Counterclaims allege fraud based upon “Bauer’s statement that it was

using the mark ... in connection with all of the 115 items identified in its ... Application.”

(ECF No. 43 ¶¶ 12, 27). The Amended Counterclaims allege that, “based upon Counterclaimant’s reasonable investigation, ... Bauer was not using [the mark] as a trademark in

connection with each and every one of the 115 items that Bauer included in its description of

goods.... Such goods include, by way of example and not by way of limitation, ‘ski bibs’ and

‘galoshes.’” Id. ¶¶ 10, 25.

A registrant is “obligated to confirm the meaning and accuracy of the statements

contained in the application before signing the declaration and prior to the submission to the

USPTO.” Hachette Filipacchi Presse v. Elle Belle LLC, 85 U.S.P.Q.2d 1090, 1094

(Trademark Tr. & App. Bd. 2007). The “USPTO will not issue a registration covering goods

upon which the mark has not been used.” Medinol Ltd. v. Neuro VASX. Inc., 67 U.S.P.Q.2d

1205, 1208 (Trademark Tr. & App. Bd. 2003). “Statements regarding the use of the mark on

the identified goods ... are certainly material to issuance of a registration.” Herbaceuticals,

Inc. v. Xel Herbaceuticals, 86 U .S.P.Q.2d 1572, 1576 (Trademark Tr. & App. Bd. 2008).

The Court concludes that the allegations of fraud related to“Bauer’s statement that it

was using the mark ... in connection with all of the 115 items identified in its ... Application,”

including “ski bibs” and “galoshes” (ECF No. 43 ¶¶ 10, 12, 25, 27), is adequately alleged with

the particularity required by the applicable pleading standards. See CTF Dev., Inc. v. Penta

Hospitality, LLC, No. C-09-2429, 2009 WL 3517617, at *2-*3 (N.D. Cal., Oct. 26, 2009)

(holding that a counterclaim adequately alleged fraud when it alleged that the applicant “made

various false representations in its statement of use,” and alleged “that, contrary to [the

applicant]’s representations, at the time that [the applicant] filed its statement of use the mark

was not being used in conjunction with ‘all of [the applicant]’s Services,’” including specific

examples). As to these allegations, the Motion to Dismiss the Amended Counterclaims is

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denied.

B. Motion to Strike

1. Standard of Review

Federal Rule of Civil Procedure 12(f) provides that “[t]he court may strike from a

pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous

matter.” Fed. R. Civ. P. 12(f). “The function of a 12(f) motion to strike is to avoid the

expenditure of time and money that must arise from litigating spurious issues by dispensing

with those issues prior to trial.” Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993),

rev’d on other grounds, Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994). “When considering

a motion to strike, the court must view the pleading in a light most favorable to the pleading

party.” In re UTStarcom, Inc. Sec. Litig., 617 F. Supp. 2d 964, 969 (N.D. Cal. 2009)

(quotation omitted). Whether to grant a motion to strike lies within the discretion of the

district court. See Fantasy, Inc., 984 F.2d at 1528.

2. Analysis

Bauer moves to strike the following matters from the Amended Counterclaims: the

allegations of fraud; paragraph 15; and the prayer for attorneys’ fees.

Bauer moves to strike the allegations of fraud “in the event the Court finds that Nike

fails to state a claim for ‘fraud.’” (ECF No. 59-1 at 18). Bauer provides no authority for the

proposition that a court should strike allegations related to a claim which has been dismissed

pursuant to Rule 12(b)(6). The Court has dismissed a portion of the Amended Counterclaims,

as discussed above; the Court declines also to strike those allegations. The Motion to Strike

is denied as to the allegations of fraud.

Paragraph 15 of the Amended Counterclaims provides:

In connection with the ‘375 Application, Mr. Bauer also attested that

‘The applicant is submitting or will submit one specimen for each class showing

the mark as used in commerce on or in connection with any item in the class of

listed goods and/or services.’ However, according to the USPTO TDR records,

no specimen of use is shown as filed with the U.S. Patent and Trademark Office

in connection with the Application.

(ECF No. 43 ¶ 15). The Amended Counterclaims do not contain further allegations related to

whether Bauer submitted specimens to the PTO. The Amended Counterclaims do not allege

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that Bauer knowingly failed to submit a specimen. The alleged absence of a specimen in the

“USPTO TDR records” is not alleged to have been fraudulent. Id. Accordingly, the Motion

to Strike paragraph 15 of the Amended Counterclaims is granted on the basis that paragraph

15 is immaterial.

The prayer for relief in the Amended Counterclaims seeks “fees.” Id. at 8. Bauer

contends that the statutes upon which Nike brings its counterclaims, 15 U.S.C. § 1064

(cancellation of registration) and 15 U.S.C. § 1119 (power of the court over registration), do

not provide for the recovery of attorneys’ fees. Nike contends that section 1117(a) of the

Lanham Act provides for the recovery of attorneys’ fees. Section 1117(a) provides that “[t]he

court in exceptional cases may award reasonable attorney fees to the prevailing party.” 15

U.S.C. § 1117(a). Bauer responds that section 1117(a) allows the recovery of attorneys’ fees

in suits brought pursuant to section 43 of the Lanham Act, 15 U.S.C. § 1125, but not for suits

brought pursuant to other sections of the Lanham Act. Bauer cites no case which has

interpreted section 1117(a) to be so limited. In the absence of such authority, the Motion to

Strike the prayer for attorneys’ fees is denied without prejudice.

C. Motion to Stay

Bauer moves for “an order staying discovery related to Nike’s counterclaims and

defense for fraud” until Nike sufficiently alleges its fraud counterclaims pursuant to Federal

Rule of Civil Procedure 9(b). (ECF No. 60 at 2).

Nike contends:

[E]ven if the Court were to grant Bauer’s Motion to Dismiss [the Amended

Counterclaims], the discovery requests highlighted in Bauer’s motion are not,

as it suggests, solely relevant to Nike’s fraud counterclaims. To the contrary,

Nike’s discovery requests are relevant to allegations in Bauer’s complaint and

to Nike’s affirmative defenses. In other words, even if Nike had not brought a

fraud counterclaim, Nike would be entitled to discovery regarding Bauer’s

registrations; when, where, and exactly how Bauer used its alleged trademarks

(to determine the validity and extent of its common law rights, if any); and

Bauer’s knowledge of, and co-existence with, the vast number of third parties

that use the motto ‘Don’t Tread on Me’ on clothing and other products to

express their American pride (which is relevant to consumer perception and

Nike’s unclean hands and fair use defenses).

(ECF No. 62 at 4).

After reviewing the motion and the submissions of the parties, the Court concludes that

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the propriety of particular discovery requests is best left to the Magistrate Judge to address on

a case by case basis. The Motion to Stay is denied without prejudice.

III. Conclusion

IT IS HEREBY ORDERED that the Motion to Dismiss and Strike Amended

Counterclaims is GRANTED in part and DENIED in part, as discussed above. (ECF No. 59).

The Motion to Stay Discovery Regarding Counterclaims for Fraud is DENIED without

prejudice. (ECF No. 60).

DATED: March 8, 2011

WILLIAM Q. HAYES

United States District Judge

Case 3:09-cv-00500-WQH-BGS Document 81 Filed 03/08/11 Page 11 of 11