Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-01317/USCOURTS-caed-1_05-cv-01317-10/pdf.json

Parties Involved:
Anlin Industries, Inc.
Counter Defendant
Paul Burgess
Counter Claimant

Document Text:

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

ANLIN INDUSTRIES, INC., a California )

corporation )

)

)

)

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Plaintiff, )

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v. )

)

PAUL BURGESS, )

)

)

)

Defendant. )

 )

1:05cv1317 DLB

ORDER GRANTING PLAINTIFF’S MOTION

TO DISMISS AFFIRMATIVE DEFENSES

AND COUNTERCLAIMS

(Document 65)

ORDER GRANTING 

DEFENDANT LEAVE TO AMEND AS

PROVIDED IN THIS ORDER

On September 19, 2006, Plaintiff Anlin Industries, Inc. (“Plaintiff”) filed the instant

motion to dismiss the affirmative defenses and counterclaims filed by Defendant Paul Burgess

(“Defendant”). The matter was heard on October 27, 2006, before the Honorable Dennis L.

Beck, United States Magistrate Judge. John G. Michael appeared on behalf of Plaintiff. 

Defendant is appearing pro se and appeared on his own behalf. 

BACKGROUND

On October 19, 2005, Plaintiff filed a complaint against Defendant alleging the

following: (1) violations of the Anticybersquatting Consumer Protection Act; (2) infringements

of federally registered trademarks in violation of 15 U.S.C. § 1114(1); (3) unfair competition in

violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (4) trademark infringement

under state common law; (5) trademark infringement under California law; and (6) unfair

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competition under state common law. These allegations are based on Defendant’s registration

and use of domain names alleged to be identical or confusingly similar to Plaintiff’s federally

registered and unregistered trademarks and trade names. 

Defendant filed his answer and counterclaim on January 12, 2006. After the Court

granted Plaintiff’s motion to strike portions of the answer and counterclaim, Defendant filed an

amended answer and counterclaim on May 19, 2006. On August 9, 2006, the Court granted

Plaintiff’s motion to dismiss the counterclaims with leave to amend. 

Defendant filed his third amended answer and counterclaims on September 6, 2006. He

sets forth the following affirmative defenses: (1) statute of limitations; (2) laches; (3) consent; (4)

“failure to do equity;” (5) unclean hands; and (6) comparative fault. In his counterclaims,

Defendant alleges (1) breach of contract; (2) breach of the implied covenant of good faith and

fair dealing; (3) negligence; (4) tortious interference with contract; (5) intentional interference

with prospective economic advantage; (6) negligent interference with prospective economic

advantage; (7) unfair competition pursuant to Cal. Bus. & Prof. Code § 17200, et seq.; and (8)

breach of contract/third party beneficiary. Defendant requests all income lost since August 2005,

$18,412,668.00 for lost future income, punitive damages and costs. 

Plaintiff filed the instant motion to dismiss the affirmative defenses and counterclaims on

September 19, 2006, and requests that all affirmative defenses and counterclaims be dismissed

without leave to amend. Defendant opposed the motion on October 11, 2006. Plaintiff filed its

reply on October 18. 2006. 

FACTUAL ALLEGATIONS FOR COUNTERCLAIMS

Defendant alleges that Plaintiff Anlin Industries, Inc. was created in 1990. Plaintiff

signed a licensing agreement to manufacture a brand of windows in 1990. From 1990 through

2001, Plaintiff did not market its windows under the “Anlin Windows” brand and sold its

windows only through authorized distributors. On April 2, 2001, after the licensing agreement

expired, Plaintiff began selling the “Anlin Windows” brand of windows to distributors who were

purchasing windows from Plaintiff prior to April 2, 2001. 

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Defendant alleges that he began selling windows that Plaintiff manufactured in

September 1999, pursuant to the 1990 licensing agreement. On April 27, 2001, when Plaintiff

was not the owner of any trademarks in “Anlin Windows” and the name was not famous,

distinctive or well known, Defendant registered the domain name www.anlinwindows.com. 

Plaintiff registered the domain name www.anlin.com in March 1998. 

Defendant also alleges that in 2003, Plaintiff’s Vice President, Eric Vidmar, contacted

Defendant and questioned him about his use of www.anlinwindows.com. Mr. Vidmar consented

to Defendant’s continued use of the site and wished Defendant continued success. 

Defendant further alleges that he entered into a contract with Grenell, Inc., DBA Better

Quality Homes, that authorized Defendant to place Better Quality Homes’ business information

on www.anlinwindows.com. Through this agreement, Defendant would sell Plaintiff’s windows

through leads generated by his website, and Better Quality Homes would order the windows

through Plaintiff and pay for them. Better Quality Homes’ 2005 distributor contract with

Plaintiff did not prohibit using Plaintiff’s trademark “Anlin windows” in website advertising or

in a domain name.

In 2005, Plaintiff contacted Brad Grenell, owner of Grenell, Inc., and questioned him

about www.anlinwindows.com. Plaintiff demanded, more than once, that Mr. Grenell remove

Better Quality Homes’ business information from www.anlinwindows.com, and stop taking

referrals from the site. Also in 2005, Plaintiff demanded that Defendant transfer ownership of

www.anlinwindows.com to it and threatened that if he did not do so, he would not be able to sell

Plaintiff’s windows. 

In the summer of 2005, Defendant called Plaintiff’s Vice President to discuss the website. 

He told Defendant that in 2003, he didn’t care about Defendant’s use of the site, but the growth

in e-commerce and the internet caused him to change his mind. 

DISCUSSION

A. LEGAL STANDARD

Dismissal under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim may

be granted if the cause of action lacks a cognizable legal theory or there is an absence of

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sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901

F.2d 696, 699 (9th Cir. 1990). In considering a motion to dismiss for failure to state a claim, the

court must accept as true the allegations of the complaint in question, Hospital Bldg. Co. v. Rex

Hospital Trustees, 425 U.S. 738, 740 (1976), construe the pleading in the light most favorable to

the party opposing the motion, and resolve all doubts in the pleader's favor. Jenkins v.

McKeithen, 395 U.S. 411, 421, reh'g denied, 396 U.S. 869 (1969), Parks School of Business, Inc.

v. Symington, 51 F.3d 1480 1484 (9th Cir. 1995). A motion to dismiss for failure to state a

claim should not be granted unless it appears beyond doubt that plaintiff can prove no set of facts

in support of the claim that would entitle him to relief. See Hishon v. King & Spalding, 467 U.S.

69, 73 (1984)(citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957)); see also Palmer v. Roosevelt

Lake Log Owners Ass'n, 651 F.2d 1289, 1294 (9th Cir. 1981). 

B. AFFIRMATIVE DEFENSES

1. First Affirmative Defense- Statue of Limitations

In his first affirmative defense, Defendant alleges that Plaintiff’s claims are barred by the

four year statute of limitations set forth in California Business and Professions Code section

17200. Defendant alleges that the claim arose on April 27, 2001, yet Plaintiff’s complaint was

not filed until October 20, 2005.

A statute of limitations defense, however, is inapplicable to Plaintiff’s claims. Under the

continuing violations doctrine, a claim is timely where there are multiple, continuing violations

of the statute so long as one of the violations occurred during the limitations period. See eg., In

Hyuk Suh v. Choon Sik Yang, 987 F.Supp. 783, 795 (N.D.Cal. 1997). Here, Plaintiff’s

complaint alleges that Defendant’s violations began on April 27, 2001, when he first registered

www.anlinwindows.com, and continued up to the filing of the complaint on October 19, 2005. 

Complaint, at ¶¶ 15, 22. Accordingly, the doctrine of continuing violations applies and

Plaintiff’s complaint is timely. 

Plaintiff’s motion to dismiss the first affirmative defense is GRANTED WITHOUT

LEAVE TO AMEND.

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2. Second Affirmative Defense - Laches

As his second affirmative defense, Defendant sets forth the doctrine of laches. To state

the defense of laches, Defendant must allege that (1) Plaintiff delayed filing suit for an

unreasonable and inexcusable length of time from the time that it knew or reasonably should

have known of its claim against Defendant; and (2) the delay operated to the prejudice or injury

of Defendant. Hyuk Suh, 987 F.Supp. at 794. 

Here, Defendant alleges that Plaintiff is barred from recovery because of “undue delay in

giving notice to Defendant of the matters alleged in the complaint and in commencing this

litigation.” Answer, at 13. Defendant does not allege the second element- that he was prejudiced

or injured by this delay. Indeed, even assuming that there was a delay on Plaintiff’s part, the

delay likely worked to Defendant’s advantage because it allowed him to continue selling

windows through www.anlinwindow.com. 

Defendant’s laches defense also fails as a matter of law. The Ninth Circuit has explained:

Laches, an equitable defense, is distinct from the statute of limitations, a creature of law.

E.g., Jackson, 25 F.3d at 888. Statutes of limitation generally are limited to actions at law

and therefore inapplicable to equitable causes of action. [citations omitted] Laches

serves as the counterpart to the statute of limitations, barring untimely equitable causes of

action. E.g., Jackson, 25 F.3d at 888. While laches and the statute of limitations are

distinct defenses, a laches determination is made with reference to the limitations period

for the analogous action at law. If the plaintiff filed suit within the analogous limitations

period, the strong presumption is that laches is inapplicable. E.g., Shouse v. Pierce

County, 559 F.2d 1142, 1147 (9th Cir.1977) ( “It is extremely rare for laches to be

effectively invoked when a plaintiff has filed his action before limitations in an analogous

action at law has run.”). 

Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835-836 (9th Cir. 2002).

As explained above, Plaintiff’s action was filed within all applicable statutes of

limitation pursuant to the continuing violations doctrine. Therefore, Defendant’s laches defense

is inapplicable and Plaintiff’s motion to dismiss the second affirmative defense is GRANTED

WITHOUT LEAVE TO AMEND.

3. Third Affirmative Defense- Consent

In his third affirmative defense, Defendant alleges that Plaintiff’s action is barred because

Plaintiff consented to and approved all of the acts and omissions at issue. Although titled

“Consent,” this affirmative defense is an estoppel defense.

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To state an estoppel defense, Defendant must plead that “(1) the party to be estopped

knows the facts, (2) he or she intends that his or her conduct will be acted on, or must so act that

the party invoking estoppel has a right to believe it is so intended, (3) the party invoking estoppel

must be ignorant of the true facts, and (4) he or she must detrimentally rely on the former's

conduct.” Lehman v. U.S., 154 F.3d 1010, 1016 (9th Cir. 1998) (citation omitted). 

Based on his factual allegations, it appears that Defendant is attempting to allege that

Plaintiff consented to his use of www.anlinwindows.com and cannot now complain about that

use. To sufficiently plead an estoppel defense, however, Defendant must allege that in reliance

on Plaintiff’s representation, Defendant took a position that was detrimental. Defendant has not

alleged that he was harmed by Plaintiff’s initial “consent.” 

Plaintiff’s motion to dismiss the third affirmative defense is GRANTED WITH LEAVE

TO AMEND to allow Defendant to plead an estoppel claim. 

4. Fourth Affirmative Defense- Failure to do Equity

Defendant’s fourth affirmative defense states “No relief may be obtained under the

complaint by reason of the plaintiff’s failure to do equity in the matters alleged in the complaint.” 

Answer, at 13. 

Affirmative defenses are governed by the same pleading standard as complaints. Federal

Rule of Civil Procedure 8(b) provides, “[a] party shall state in short and plain terms the party’s

defenses to each claim asserted...” Like complaints, affirmative defenses must be pled with

enough specificity or factual particularity to give a plaintiff “fair notice” of the defense being

advanced. Woodfield v. Bowman, 193 F.3d 354, 362 (5th 1999); Wyshak v. City Nat. Bank, 607

F.2d 824, 827 (9th Cir. 1979). 

Defendant has failed to satisfy the pleading requirements of Rule 8(b). There is no

statement of the facts underlying this defense, although it appears that this defense is another

attempt to state an estoppel defense.

Plaintiff’s motion to dismiss the fourth affirmative defense is therefore GRANTED

WITHOUT LEAVE TO AMEND insofar as Defendant alleges “failure to do equity.” Defendant

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has been granted leave to amend to attempt to state an estoppel defense, and may incorporate any

relevant facts into his estoppel amendment. 

5. Fifth Affirmative Defense- Unclean Hands

For his fifth affirmative defense, Defendant states that “As a result of the acts and

omissions in the matters relevant to this complaint, plaintiff has unclean hands and is therefore

barred from asserting any claims against the defendant.” 

 The unclean hands doctrine “closes the doors of a court of equity to one tainted with

inequitableness or bad faith relative to the matter in which he seeks relief.” Precision Instr. Mfg.

Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945), Jarrow Formulas, Inc. v. Nutrition

Now, Inc., 304 F.3d 829, 841 (9th Cir.2002). To establish unclean hands, a defendant must

demonstrate (1) inequitable conduct by the plaintiff; (2) that the plaintiff’s conduct directly

relates to the claim which it has asserted against the defendant; and (3) that plaintiff's conduct

injured the defendant. Fuddruckers, Inc. v. Doc's B.R. Others, Inc., 826 F.2d 837, 847 (9th

Cir.1987) (to establish unclean hands, “the defendant must demonstrate that the plaintiff's

conduct is inequitable and that the conduct relates to the subject matter of its claims.”); Levi

Strauss & Co. v. Shilon, 121 F.3d 1309, 1313 (9th Cir.1997).

Here, Defendant’s general and conclusory allegation fails to identify any conduct upon

which the defense is based and fails to set forth the elements of the defense. The allegations

therefore do not put Plaintiff on fair notice of the grounds upon which the defense is based. 

See Sun Microsystems, Inc. v. Datram Corp., 1997 WL 50272, *4 (N.D.Cal.1997) (finding that

defendant has provided plaintiff with “fair notice” by sufficiently setting forth the elements of the

estoppel defense). 

In any event, this affirmative defense is basically another estoppel claim. Plaintiff’s

motion to dismiss is GRANTED WITHOUT LEAVE TO AMEND as to the unclean hands

defense. To the extent Defendant wishes to state an estoppel claim, he can do so in the estoppel

amendment.

///

///

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6. Sixth Affirmative Defense- Comparative Fault

For his sixth affirmative defense, Defendant alleges that Plaintiff consented to and

approved all events about which it complains, and cannot now argue that it has been wronged by

those events. Although titled “Comparative Fault,” this affirmative defense is really another

attempt to state an estoppel defense based on Plaintiff’s alleged consent to the use of

www.anlinwindows.com. This defense fails for the same reasons as the defense entitled,

“Consent.” To the extent that Defendant is attempting to state a true comparative fault defense,

he is advised that the defense only applies to tort actions and thus would be inapplicable to the

instant action.

Accordingly, Plaintiff’s motion to dismiss the sixth affirmative defense is GRANTED

WITHOUT LEAVE TO AMEND. To the extent Defendant wishes to pled an estoppel defense,

he may do so in his estoppel amendment.

Summary of Motion to Dismiss Affirmative Defenses

Plaintiff’s motion to dismiss the statute of limitations defense and the laches defense is

GRANTED WITHOUT LEAVE TO AMEND. Plaintiff’s motion to dismiss the consent defense

is GRANTED WITH LEAVE TO AMEND to allow Defendant to attempt to state an estoppel

defense. The motion to dismiss the failure to do equity defense and the unclean hands defense is

GRANTED WITHOUT LEAVE TO AMEND. However, to the extent Defendant wishes to

incorporate any relevant facts into his estoppel amendment, he may do so. Similarly, Plaintiff’s

motion to dismiss the comparative fault defense is GRANTED WITHOUT LEAVE TO

AMEND. Defendant may incorporate any relevant facts into his estoppel amendment.

Therefore, pursuant to this order, Defendant is GRANTED LEAVE TO AMEND to

attempt to state an estoppel defense. 

C. COUNTERCLAIMS

1. Breach of Implied Contract

In Defendant’s first counterclaim, he alleges that from 2003 to 2005, he had an implied

contract existed with Plaintiff based on Plaintiff’s “conduct that they consented to the Defendant

providing a free estimate to homeowner(s) who requested one from www.anlinwindows.com”

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and “conduct that they consented to the Defendant working with an authorized Anlin Industries,

Inc., distributor regarding www.anlinwindows.com.” Answer, at 21. Defendant alleges that he

performed this contract by providing free estimates and working with an authorized dealer, but

that Plaintiff changed their conduct, removed their consent and breached the contract in 2005. 

As a result of this breach, Defendant alleges that he suffered past, present and future damages.

There are two fatal flaws in Defendant’s counterclaim. 

The first deficiency is the lack of consideration. The elements for a cause of action based

on contract, whether express or implied, include mutual assent and consideration. Division of

Labor Law Enforcement v. Transpacific Transportation Co., 69 Cal.App.3d 268, 275 (1977). In

basic terms, consideration is the reason which moves the contracting party to enter into the

contract, i.e., something of value that is given in exchange for getting something from another

person. It is a basic, necessary element for the existence of a valid contract.

Here, Defendant fails to allege consideration for the alleged implied contract allowing

him to use www.anlinwindows.com. He doesn’t allege that there was any consideration that

passed in exchange for allowing him to continue to use Plaintiff’s name in his website. 

Defendant seems to argue that consideration existed based on his use of the website to provide

estimates and sell windows, and Plaintiff’s acceptance of these window orders. However, the

alleged contract at issue does not involve Defendant’s ability to sell windows, an ability which he

still has, but rather involves Defendant’s ability to use www.anlinwindows.com. Defendant has

not alleged that Plaintiff gave anything in consideration for Defendant’s use of the website, and

unless there are significant facts that have remained undisclosed during Defendant’s many

attempts to amend, he cannot allege such consideration. 

Second, even if Defendant could allege the existence of a valid contract, he cannot

overcome the fact that the agreement would have been terminable at will, meaning that either

party can terminate at any time. Under California law, agreements of non-specified duration are

terminable at the will of either party. Rano v. Sipa Press, Inc., 987 F.2d 580, 585 (9th Cir. 1993);

Zimco Restaurants, Inc. v. Bartenders and Culinary Workers' Union, 165 Cal.App.2d 235, 240

(1958). Defendant argues that the contract duration was subject to him maintaining a valid

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registration for the domain name www.anlinwindows.com, and Plaintiff continuing to operate in

business. Even if a contract existed, however, his theory imposes a term on the parties that they

did not bargain for and ignores California law. Again, unless facts exist that the Court is

unaware of, Defendant cannot remedy this deficiency. 

Accordingly, for the reasons above, Plaintiff’s motion to dismiss is GRANTED and

Defendant’s counterclaim for breach of an implied contract is DISMISSED WITHOUT LEAVE

TO AMEND. 

2. Breach of Implied Convenant of Good Faith and Fair Dealing

In his second counterclaim, Defendant alleges that Plaintiff breached the implied

covenant of good faith and fair dealing by breaching the alleged implied contract between them. 

While the law implies in every contract a covenant of good faith and fair dealing, there is

no such duty where there is no contract. Seaman's Direct Buying Service, Inc. v. Standard Oil

Co., 36 Cal.3d 752, 768 (1984). As explained above, the Court has determined that Defendant

cannot state a claim for breach of an implied contract between him and Plaintiff. Therefore, as

there is no contract that would give rise to the implied covenant of good faith and fair dealing,

Defendant is unable to state such a claim. Nor has Defendant alleged a fiduciary relationship or

other relationship that would give rise to the implied covenant of good faith and fair dealing. 

Plaintiff’s motion to dismiss the second counterclaims is GRANTED and Defendant’s

counterclaim for breach of the implied covenant of good faith and fair dealing is DISMISSED

WITHOUT LEAVE TO AMEND.

3. Negligence

In his third counterclaim, Plaintiff attempts to state a cause of action for negligence. He

simply alleges that Plaintiff owed him a legal duty “to use due care from a contract that existed

between” them, that Plaintiff breached that duty, and that as a result, Defendant suffered harm. 

As this Court has already explained to Defendant, a cause of action for negligence

requires (1) that the defendant owed a duty of care to the plaintiff; (2) that the defendant breached

this duty; (3) proximate cause; and (4) harm. County of Santa Clara v. Atlantic Richfield Co.,

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137 Cal.App.4th 292, 318 (2006); Management Activities, Inc. v. U.S., 21 F.Supp.2d 1157, 1174

(C.D. Cal. 1998). 

In his attempt to amend to allege these elements, Defendant conclusorily alleges that

Plaintiff owed him a duty arising from the alleged contract between them. However, there was

no contract between the parties giving rise to any duty. Since there is no recognized duty,

Defendant cannot state a claim for negligence.

Defendant has already been given an opportunity to remedy this deficiency. Therefore,

Plaintiff’s motion to dismiss is GRANTED and Defendant’s third counterclaim is DISMISSED

WITHOUT LEAVE TO AMEND.

4. Tortious Interference with Contract

For his fourth counterclaim, Defendant focuses on a different alleged contract- one

between Defendant and Grenell Inc., DBA Better Quality Homes (“Grenell, Inc.”). He alleges

that he had an oral contract with Grenell, Inc., and that Plaintiff knew of this contract and

intended to induce its breach. He alleges that Plaintiff was in contact with Grenell, Inc., and

inquired as to how many windows Defendant was selling through www.anlinwindows.com. As a

result of this “unjustified conduct,” Defendant alleges that he suffered injury. 

To state a cause of action for intentional interference with contractual relations under

California law, Defendant must establish that: (1) it has a valid and existing contract with a third

party; (2) Plaintiff had knowledge of the contract; (3) Plaintiff committed an intentional act

designed to induce a breach or disrupt the contractual relationship; (4) actual breach or disruption

of the contract relationship occurred; and (5) damages were suffered as a result. 

Sebastian Int’l, Inc. v. Rusolillo, 162 F.Supp.2d 1198, 1203 (C.D.Cal.2001) (citing Quelimane

Co. v. Stewart Title Guar. Co., 19 Cal.4th 26, 55 (1998). “[W]rongfulness independent of the

inducement to breach the contract is not an element of the tort of intentional interference with

existing contractual relations.” Quelimane, 19 Cal.4th at 55-56; Coastal Abstract Service, Inc. v.

First American Title Ins. Co., 173 F.3d 725, 733 (9th Cir. 1999). 

Assuming the existence of a valid oral contract between Defendant and Grenell Inc.,

Defendant appears to misunderstand the nature of the contract. The contract allowed Defendant

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to sell Anlin windows through Grenell, Inc., by any means, and not solely through the website

www.anlinwindows.com. In other words, Defendant’s use of the website had nothing to do with

any contract between him and Grenell, Inc., and the contract certainly wasn’t conditioned on

Defendant’s use of the site. In fact, Defendant can continue to sell windows through Grenell,

Inc. by any means other than use of www.anlinwindows.com. Defendant has therefore failed to

allege an actual breach or disruption of the contract. That Defendant can no longer use

www.anlinwindows.com to sell windows does not breach, or even disrupt, his contract with

Grenell, Inc. 

Defendant has already been given an opportunity to correct this deficiency. Therefore,

Plaintiff’s motion to dismiss is GRANTED and Defendant’s fourth counterclaim is DISMISSED

WITHOUT LEAVE TO AMEND.

5. Intentional Interference with Prospective Economic Advantage

In his fifth counterclaim, Defendant alleges that Plaintiff destroyed an economic

relationship that he and Grenell, Inc. had with www.anlinwindows.com. He alleges that he

would have had a future economic benefit with Grenell, Inc. from www.anlinwindows.com. He

further alleges that Plaintiff breached his contract with Grenell, Inc., engaged in wrongful

conduct, and was aware of the economic relationship. He alleges that Plaintiff’s actions were

“designed to breach the contract and file a frivolous lawsuit against the Defendant to obtain

ownership of www.anlinwindows.com.” Answer, at 24. Defendant indicates that today, he can

only canvass to generate leads and sell Anlin windows through Grenell, Inc.

Intentional interference with prospective business advantage is a tort similar to tortious

interference with contract. To prevail on a cause of action for intentional interference with

prospective economic advantage in California, a plaintiff must plead and prove (1) an economic

relationship between the plaintiff and some third party, with the probability of future economic

benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) the defendant’s

intentional acts designed to disrupt the relationship; (4) actual disruption of the relationship; and

(5) economic harm to the plaintiff proximately caused by the defendant's acts. Reeves v. Hanlon,

33 Cal.4th 1140, 1152 n. 6 (2004). Plaintiff must plead wrongful conduct beyond the fact of the

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interference itself. Penna v. Toyota Motor Sales, USA, Inc., 11 Cal.4th 376, 393 (1995) (plaintiff

must plead and prove that the defendant’s interference was wrongful “by some measure beyond

the fact of the interference itself”).

As explained above, Defendant’s relationship with Grenell, Inc. was not conditioned on

his use of www.anlinwindows.com,and therefore Plaintiff could not have interfered with the

relationship by prohibiting Defendant from using the site. Indeed, Defendant is currently able to

sell windows through Grenell, Inc., albeit not through the use of www.anlinwindows.com, which

supports a finding that there has been no interference with his relationship with Grenell, Inc. 

Additionally, even assuming that a relationship based on the site existed, Defendant has

not alleged any wrongful act beyond the alleged act of the actual interference. In fact, a

manufacturer has the unfettered right to determine with whom it will deal (absent antitrust

considerations) regardless of the adverse effect that the decision may have on its dealers or

independent contractors. Ricchetti v. Meister Brau, Inc., 431 F.2d 1211, 1214 (9th Cir. 1970). 

 Defendant has already been given an opportunity to correct this deficiency. Therefore,

Plaintiff’s motion to dismiss is GRANTED and Defendant’s fifth counterclaim is DISMISSED

WITHOUT LEAVE TO AMEND.

6. Negligent Interference with Prospective Economic Advantage 

For his sixth counterclaim, Defendant alleges that he has an existing business relationship

with Grenell, Inc. and Anlin Industries. He alleges that Plaintiff owes him a duty of care, and

that Plaintiff wrongfully interfered with this relationship. Defendant contends that as a result of

this unjustified conduct, his business was damaged and he suffered substantial monetary

damages. 

As with the tort of negligence, the tort of negligent interference with prospective

economic advantage arises only when the plaintiff owes the defendant a duty of care. LiMandri

v. Judkins, 52 Cal.App.4th 326, 349 (1997). Where there is no duty, there is no such cause of

action.

In his counterclaim, Defendant simply alleges that “Plaintiff owes a duty of care to the

Defendant.” Answer, at 24. However, as explained in the Court’s analysis of the negligence

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counterclaim, Plaintiff and Defendant are not in any type of relationship that would give rise to a

duty of care. Plaintiff and Defendant are not parties to a contract, nor is Defendant a direct

wholesaler of Anlin windows. In other words, Defendant and Plaintiff are not connected in a

way that would require Plaintiff to use a duty of care in their interactions. Defendant is therefore

unable to state a cause of action for negligent interference with prospective economic advantage.

Plaintiff’s motion to dismiss is GRANTED and Defendant’s sixth counterclaim is

DISMISSED WITHOUT LEAVE TO AMEND.

7. Unfair Competition under Cal. Bus. & Prof. Code § 17200, et seq.

For his seventh counterclaim, Defendant alleges that Plaintiff’s unjustified actions

(breach of contract, tortious interference with contract, intentional interference with prospective

economic advantage, negligent interference with prospective economic advantage, and

negligence) damaged Defendant’s business, created a loss, and caused Defendant to suffer

damages.

The California Unfair Practices Act, Cal. Bus. & Prof. Code § 17200, et seq., prohibits

unfair competition, which is defined as “any unlawful, unfair or fraudulent business act or

practice.” Bus. & Prof.Code, § 17200; Klein v. Earth Elements, Inc., 59 Cal.App.4th 965, 968

(1997). For the reasons explained above, however, each of the causes of action upon which

Defendant bases his section 17200 claim are without merit. Therefore, Defendant is unable to

allege any unlawful, unfair or fraudulent business practice.

Plaintiff’s motion to dismiss is GRANTED and Defendant’s seventh counterclaim is

DISMISSED WITHOUT LEAVE TO AMEND.

8. Breach of Contract/Third Party Beneficiary 

For his eighth and final counterclaim, Defendant alleges that he was intended to benefit

from the 2005 distributor contract between Plaintiff and Grenell, Inc. Specifically, he contends

that he was a member of the “class of persons” described in the contract and was therefore

entitled to use Plaintiff’s trademarks. As a result of the alleged breach of contract, Defendant

contends that he suffered harm. 

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California Civil Code section 1559 provides that a “contract made expressly for the

benefit of a third person” may be enforced by that person at any time before the parties rescind it. 

To state a cause of action, Defendant must first establish his standing as a third-party beneficiary

under the distributor contract. Road Sprinkler Fitters Local Union No. 669 v. G & G Fire

Sprinklers, 102 Cal.App.4th 765, 775 n. 14 (2002). An intent to benefit the third party must be

clearly manifested by the contracting parties; if the contract incidentally benefits a third party, but

is not expressly made for his benefit, he cannot recover. Southern California Gas Co. v. ABC

Const. Co., 204 Cal.App.2d 747, 750-751 (1962).

Here, Defendant claims that under the terms of the distributor contract, he was entitled to

use Plaintiff’s trademark. Defendant does not, however, set forth any of the alleged terms of the

distributor contract, and wholly fails to allege that Plaintiff and Grenell, Inc. expressly intended

for Defendant to benefit from the contract in the manner in which he proposes. In fact, the

allegations of the complaint demonstrate that he cannot allege that the contract was made

expressly for his benefit. He specifically states that he was not directly named in the distributor

contract, but contends that he is within the “class of persons.” Such a broad definition certainly

does not meet the strict requirement of section 1559 and interpreting case law.

Defendant has had numerous opportunities to amend his counterclaims to sufficiently

state a cause of action. He has failed to do so. Accordingly, Plaintiff’s motion to dismiss is

GRANTED and Defendant’s eighth counterclaim is DISMISSED WITHOUT LEAVE TO

AMEND.

ORDER

1. Plaintiff’s motion to dismiss Defendant’s affirmative defenses is GRANTED. 

Defendant is GRANTED LEAVE TO AMEND to state an estoppel defense; and

2. Plaintiff’s motion to dismiss Defendant’s counterclaims is GRANTED

WITHOUT LEAVE TO AMEND.

IT IS SO ORDERED. 

Dated: November 8, 2006 /s/ Dennis L. Beck 

3b142a UNITED STATES MAGISTRATE JUDGE

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