Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00999/USCOURTS-caed-1_05-cv-00999-1/pdf.json

Parties Involved:
Resource Lenders, Inc.
Counter Defendant
Source Solutions, Inc.
Counter Claimant

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

RESOURCE LENDERS, INC., a

California Corporation,

 Plaintiff,

 v. 

SOURCE SOLUTIONS, INC., a Nevada

Corporation, 

 Defendant.

1:05-CV-0999 OWW LJO

ORDER GRANTING PLAINTIFF’S

MOTION TO DISMISS

COUNTERCLAIMS

(Rule 12(b)(6), F.R.Civ.P.) 

I. INTRODUCTION

Plaintiff Resource Lenders moves under Rule 12(b)(6) of the

Federal Rules of Civil Procedure to dismiss counterclaims

asserted by Defendant Source Solutions. Defendant opposes the

motion. 

II. PROCEDURAL HISTORY 

This trademark infringement, unfair trade practices, and

dilution action arises out of the complaint of Plaintiff, a real

estate mortgage loan provider, that defendant SSI has infringed

on Plaintiff’s service marks, which are (1) “Resource Lenders”

and (2) “Resource Lenders Your Resource For Real Estate Loans.” 

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Defendant, a real estate sales and mortgage loan company,

currently uses the mark “R.E.*Source Redefining Real Estate,”

(where the * is a logo of a house) and argues that its mark does

not infringe on or dilute Plaintiff’s mark. Plaintiff argues

that SSI’s use of the terms “RESource”, “R.E.Source”, and/or

“R.E.*Source” as the introductory word in its mark does infringe

and should be enjoined.

Plaintiff filed its complaint on August 3, 2005. (Doc. 1,

Compl.) Plaintiff brings six claims: (1) Infringement of

Federally Registered Service Mark (15 U.S.C. § 1114(1)); (2)

Infringement of Service Mark; (3) Trade Name Infringement (Cal.

Bus. & Prof. Code § 14330); (4) Unfair Competition and False

Designation of Origin (15 U.S.C. § 1125(a)); (5) Unfair

Competition and Unfair Business Practices (Cal. Bus. & Prof. Code

§ 17000, et seq., and § 17200); and (6) Dilution (15 U.S.C. §

1125(c); Cal. Bus. & Prof. Code § 14330). 

Defendant answered the complaint on September 6, 2005. 

(Doc. 18, Answer.) Asserted with the answer are two

counterclaims, one for interference with prospective economic

advantage, the other for unfair competition under California

common law. (Doc. 18, Answer at 6-7.) Plaintiff filed a motion

to dismiss counterclaims on September 28. (Doc. 31, Mot. to

Dismiss Countercls.) Defendant filed its opposition to

Plaintiff’s motion to dismiss on October 28. (Doc. 49, Opp. to

Mot. to Dismiss Countercls.) Plaintiff filed a reply to

Defendant’s opposition on November 4. (Doc. 51, Reply Mem.) 

Plaintiff moved for a preliminary injunction on August 8,

2005. (Doc. 5, Mot. for Prelim. Inj.) That motion has been

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granted in part. 

III. BACKGROUND

Plaintiff RESOURCE LENDERS is a real estate mortgage and

loan services provider headquartered in Fresno, California, with

offices in Bakersfield, Visalia, Porterville, Hanford, and San

Luis Obispo. Plaintiff alleges it has engaged in extensive

advertising and promotion of its real estate mortgage and loan

services under the name “Resource Lenders” for the past fifteen

(15) years including radio and newspaper advertising, circulating

flyers and brochures, and advertising signs, including those

posted on the scoreboard at Grizzlies Baseball Stadium in Fresno,

California. The parties do not dispute that Plaintiff owns two

marks: (1) “Resource Lenders” and (2) “Resource Lenders Your

Source for Real Estate Loans.” Defendant opened its business in

2004. Defendant represents buyers and sellers in real estate

transactions and also provides real estate loans. (Wren Decl.

¶¶ 2, 3) Defendant asserts that the majority of its business is

real estate transactions and not making loans. (Id. at ¶ 4) The

mark currently in use by Defendant is “R.E.*Source Redefining

Real Estate” (where the * is a logo of a house). Defendant has

also used the mark “RESource Real Estate Mortgage,” although

Defendant asserts it no longer uses this mark.

In or about January 2005, Plaintiff discovered that

Defendant had adopted the business name and designation “RESource

Real Estate Mortgage” and that Defendant was using these names to

promote real estate mortgage and loans services in the Fresno

area. (Barnes Decl. ¶ 8)

Plaintiff sent a first demand letter to Defendant on January

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28, 2005 to which Defendant failed to respond. (Miller Decl.

¶ 2, Ex. A) Plaintiff made a follow-up telephone call in March

2005, with no response. Plaintiff sent a second letter with a

draft unfiled complaint to Defendant on March 22, 2005. 

Defendant responded to this letter, and several weeks of

discussions and negotiations between the parties regarding

Defendant’s business name followed. The discussions did not

result in any agreement or resolution. (Barnes Decl. ¶ 8) 

In its opposition, Defendant asserts that settlement

discussions broke down because Plaintiff refused to include a

“notice and cure” provision in the proposed settlement agreement. 

Defendant asserts that it began using the designation

“R.E.*Source Redefining Real Estate” in response to Plaintiff’s

complaints and with the approval of Plaintiff’s counsel. (Doc.

17, Def.’s Opp. 2-3; Adams Decl. Ex. A) Defendant denies

continuing to use the mark “RESource Real Estate Mortgage,” and

asserts that current appearances of this mark are merely

infrequent and mistaken uses that have not yet been addressed in

its transitioning process. (Doc. 17, Def.’s Opp. 2-3) Defendant

argues it has taken steps to implement its name change, including

ordering new business cards, signs, and filing a new fictitious

business statement with the City of Fresno. (Id.; Doc. 17,

T. Wren Decl., ¶ 5, Ex. A) However, Plaintiff notes that the

mark “RESource Real Estate Mortgage” has appeared in the October

2005 issue of Guide to Better Homes. (Doc. 34, 09/30/05 Miller

Decl. Ex. A) This advertisement lists two real estate agents at

the top of the page and lists seven mortgage consultants and/or

mortgage consultant/real estate agents at the bottom of the page. 

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An almost identical advertisement appeared in the September 2005

issue of the Guide, which Plaintiff attached in its initial

moving papers. (Doc. 23, 09/12/05 Miller Decl. Ex. F) Defendant

states that it wants all of its agents to use its new mark, and

attributes the appearance of this advertisement in the October

2005 issue to “confusion among Defendant’s over 250 employees and

contractors.”

Despite Defendant’s changing its name to “R.E.* Source

Redefining Real Estate,” Plaintiff argues that Defendant’s use of

the mark “RESource” is nevertheless an infringing use because the

term “RESource” is prominently displayed on the new mark, just as

it was on the old mark and is confusingly similar.

Plaintiff alleges that Defendant uses the infringing marks

in the following ways: (1) portable street signs (MacArthur

Decl., Ex. H); (2) Defendant maintains fictitious business name

statements for “RESOURCE” and “RE-SOURCE” (Miller Decl. ¶ 8, Ex.

E); (3) Defendant has a mortgage broker’s license listing its

DBA’s as “RESOURCE” and “RE-SOURCE” (Id. at ¶ 9, Ex. F); (4)

Defendant displays the mark on web-sites, including

http://www.resourcerecruit.com; http://www.resourcecorporate.com;

and http://www.resourceontheweb.com (Id. at Exs. H, I).

Defendant counterclaims that Plaintiff initially approved

Defendant’s name change to “R.E.* Source Redefining Real Estate,”

and that Defendant, in reliance on this representation, had a new

logo designed, and had new business cards and letterhead printed

and new signs made. Defendant argues that Plaintiff’s suit to

force Defendant to change its name again constitutes interference

with prospective economic advantage and unfair competition. For

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both causes of action, Defendant claims damages for loss of

revenue; for its unfair competition claim, Defendant also claims

damages for lost goodwill and reputation. 

IV. LEGAL STANDARD

Rule 12(b)(6) of the Federal Rules of Civil Procedure allows

a party to attack a counterclaim for failure to state a claim

upon which relief can be granted. A motion to dismiss a

counterclaim for failure to state a claim is evaluated in the

same manner as a motion to dismiss a complaint under Rule

12(b)(6). Aagard v. Palomar Builders, Inc., 344 F.Supp.2d 1211,

1214 (E.D.Cal. 2004); Whitney Information Network, Inc. v.

Gagnon, 353 F.Supp.2d 1208, 1210 (M.D.Fla. 2005); Ramada

Franchise Systems, Inc. v. Tresprop, Ltd., 75 F.Supp.2d 1205,

1208-09 (D.Kan. 1999). 

A motion to dismiss under Rule 12(b)(6) is disfavored and

rarely granted: “[a] complaint should not be dismissed unless it

appears beyond doubt that plaintiff can prove no set of facts in

support of his claim which would entitle him to relief.” Van

Buskirk v. CNN, Inc., 284 F.3d 977, 980 (9th Cir. 2002)

(citations omitted). In deciding whether to grant a motion to

dismiss, the court “accept[s] all factual allegations of the

complaint as true and draw[s] all reasonable inferences in favor

of the nonmoving party.” TwoRivers v. Lewis, 174 F.3d 987, 991

(9th Cir. 1999). 

V. ANALYSIS

1. Interference with Prospective Economic Advantage

To prevail on a cause of action for intentional interference

with prospective economic advantage in California, a plaintiff

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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, 95 P.3d 513, 520, 17 Cal.Rptr.3d 289, 298 

(2004).

Defendant has not pled in its counterclaim any facts to

establish the elements of interference with prospective economic

advantage. Defendant does not plead either that it had an

economic relationship with a third party or Plaintiff’s

interference with such relationship. Nor does Defendant describe

what wrongful “measure or means” Plaintiff used to effect the

interference beyond the interference itself. Della Penna v.

Toyota Motor Sales, U.S.A., Inc., 11 Cal.4th 376, 392-93 (1995).

Defendant merely claims that Plaintiff’s suit to force Defendant

to again change its name, after Plaintiff allegedly approved

Defendant’s adoption of its present name and Defendant’s reliance

on that approval, in making the initial change, is “interfering

with [Defendant’s] business.” (Doc. 18, Answer at 6.) 

Defendant’s first counterclaim does not state a claim for

interference with prospective economic advantage.

2. Unfair Competition

Defendant re-alleges Plaintiff’s alleged approval of

Defendant’s name change and Defendant’s reliance on this

representation. It claims that Plaintiff’s suit constitutes

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unfair competition under Sections 17200, et seq., of the

California Business and Professions Code. Defendant claims

damages for the lost goodwill, reputation, and revenue which

Plaintiff’s conduct has allegedly caused Defendant. 

A UCL action is an equitable action by means of which a

plaintiff may recover money or property obtained from the

plaintiff or persons represented by the plaintiff through unfair

or unlawful business practices. It is not an all-purpose

substitute for a tort or contract action. Damages are not

available under section 17203, except by way of restitution. 

Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1144

(2003). 

Defendant’s unfair competition counterclaim does not allege

that Plaintiff has received money from Defendant’s customers that

should be returned to Plaintiff. The type of damages claimed are

not available under California’s unfair competition law. 

3. Estoppel

Defendant neither addresses nor mentions these deficiencies

in its opposition to Plaintiff’s motion to dismiss counterclaims. 

(Doc. 49, Opp. to Mot. to Dismiss.) Instead, Defendant asks the

court to grant it leave to amend its counterclaims to add an

equitable estoppel counterclaim. Id. at 2. 

Estoppel is a defense, not a claim. See, e.g., Rule 8(c),

F.R.Civ.P.; Starter Corp. v. Converse, Inc., 170 F.3d 286, 298

(2nd Cir. 1999) (“[a]ffirmative defenses do not themselves

support any affirmative relief”); 13 Witkin, Summary of

California Law, Equity § 190 (10th ed. 2005), p. 527 (“[t]he

doctrine [of equitable estoppel] acts defensively only”). As

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such, it has already been pled in the answer. Defendant’s answer

sets forth seven affirmative defenses. Of these, the third and

sixth plead estoppel, based on the same allegations of

representation and reliance as are set forth in the

counterclaims. (Doc. 18, Answer at 3-4.) 

Rule 15(a) allows a party to amend its pleading once as a

matter of course at any time before a responsive pleading is

served. Rule 15(a), F.R.Civ.P. Plaintiff’s Rule 12(b) motion to

dismiss is not a “responsive pleading.” Crum v. Circus Circus

Enterprises, 231 F.3d 1129, 1130 n.3 (9th Cir. 2000). Defendant

is therefore entitled to amend its counterclaim. See Rule 7(a),

F.R.Civ.P. 

Defendant’s proposed amendment, however, does not address

the counterclaims’ defects. Jones v. Community Redevelopment

Agency of City of Los Angeles, 733 F.2d 646, 650-51 (9th Cir.

1984); Bridgeport Music, Inc. v. Dimension Films, 410 F.3d 792,

805 (6th Cir. 2005); 6 Wright, Miller & Kane, Federal Practice &

Procedure: Civil § 1487 & n.26; 2 Schwarzer, Tashima & Wagstaffe,

California Practice Guide: Federal Civil Procedure Before Trial

§§ 9:260-63. 

VI. CONCLUSION

Plaintiff’s motion to dismiss Defendant’s counterclaims is

GRANTED. Defendant shall have twenty (20) days from service of

this order to amend counterclaims. 

 

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SO ORDERED

DATED: December 22___, 2005.

/s/Oliver W. Wanger

OLIVER W. WANGER

United States District Judge

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