Steve Elias v. Eliran Pilo ( 2019 )


Menu:
  •      Case: 18-11553      Document: 00515049862         Page: 1    Date Filed: 07/25/2019
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT
    United States Court of Appeals
    Fifth Circuit
    FILED
    No. 18-11553                        July 25, 2019
    Summary Calendar
    Lyle W. Cayce
    Clerk
    STEVE ELIAS, also known as Steve Wainshtok, doing business as Magic
    Locksmith,
    Plaintiff - Appellant
    v.
    ELIRAN PILO,
    Defendant - Appellee
    Appeals from the United States District Court
    for the Northern District of Texas
    USDC No. 4:18-CV-586
    Before JOLLY, COSTA, and HO, Circuit Judges.
    PER CURIAM:*
    Steve Elias operates a locksmithing business under the name Magic
    Locksmith. He alleges that Eliran Pilo was unjustly enriched at his expense
    when Pilo began offering locksmithing services through the website
    magiclocksmith.net. The district court dismissed Elias’s complaint for failure
    to state a claim. We affirm.
    * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
    be published and is not precedent except under the limited circumstances set forth in 5TH
    CIR. R. 47.5.4.
    Case: 18-11553         Document: 00515049862         Page: 2     Date Filed: 07/25/2019
    No. 18-11553
    I.
    Steve Elias has operated a licensed locksmithing business known as
    Magic Locksmith in Los Angeles, California since November 2004. He alleges
    that he has amassed common law rights to the mark Magic Locksmith through
    his continuous use of the mark to register and market his business and provide
    locksmithing services. Pertinent to this appeal, in February 2008 Elias created
    a website with the domain name magiclockandkey.com. Elias has prominently
    displayed the Magic Locksmith mark on this website.
    Elias alleges that, in August 2016, Eliran Pilo, a Texas resident,
    registered and began using the domain magiclocksmith.net. He claims that
    Pilo’s use of a domain name identical to his mark to offer locksmithing services
    over the internet is likely to cause confusion. Elias points to three negative
    reviews on his Yelp 1 page from customers who claimed to have been deceived
    as evidence that Pilo’s use of the domain has created actual confusion. Each
    review alleged that the technician who arrived charged higher prices than
    stated in the website. One of those reviews listed the magiclocksmith.net
    domain, calling the site “a fraud” and a “hoax.”
    On January 5, 2017, Elias filed an arbitration claim against “Magic
    Locksmith” 2 concerning the magiclocksmith.net domain. Elias alleged that the
    domain name was confusingly similar to his Magic Locksmith mark; that
    Magic Locksmith did not have any right or legitimate interest in the
    magiclocksmith.net domain; and that Magic Locksmith registered the domain
    in bad faith. Magic Locksmith did not respond and therefore the arbitration
    panel decided the case on the basis of Elias’s complaint, accepting his
    1   Yelp is a website which allows individuals to post reviews of businesses.
    2In the arbitration proceeding, Magic Locksmith refers to the business Pilo allegedly
    operated rather than Elias’s business or his mark.
    2
    Case: 18-11553      Document: 00515049862     Page: 3   Date Filed: 07/25/2019
    No. 18-11553
    reasonable allegations and inferences as true, and found in his favor. On
    February 16, 2017, the panel ordered that the domain magiclocksmith.net be
    transferred to Elias.
    Elias alleges that he discovered Pilos’s identity after uncovering a
    telephone number traced to him in the registration information of
    magiclocksmith.net. While Elias discovered Pilos’s identity on January 10,
    2017, five days after filing the arbitration claim, Pilos was never named as a
    party in the arbitration and did not participate in the proceedings.
    Elias initially commenced this action in Texas state court. Pilo removed
    the case to federal court, at which point Elias filed an amended complaint. The
    amended complaint stated five causes of action: theft of property, conversion
    of property, trespass to personal property, unjust enrichment, and trade secret
    misappropriation. Pilo moved to dismiss for failure to state a claim. See Fed.
    R. Civ. P. 12(b)(6). The district court granted Pilo’s motion and dismissed
    Elias’s claims with prejudice. Elias timely appealed.
    II.
    We review de novo a district court’s dismissal of a complaint for failure
    to state a claim. Rios v. City of Del Rio, 
    444 F.3d 417
    , 420 (5th Cir. 2006). To
    state a claim for relief, a pleading must contain “a short and plain statement
    of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
    8(a)(2). “To survive a motion to dismiss, a complaint must contain sufficient
    factual matter, accepted as true, to ‘state a claim to relief that is plausible on
    its face.’” Ashcroft v. Iqbal, 
    556 U.S. 662
    , 678 (2009) (quoting Bell Atl. Corp. v.
    Twombly, 
    550 U.S. 544
    , 570 (2007)). “A claim has facial plausibility when the
    plaintiff pleads factual content that allows the court to draw the reasonable
    inference that the defendant is liable for the misconduct alleged.” 
    Id. (citing Twombly,
    550 U.S. at 556).
    3
    Case: 18-11553       Document: 00515049862          Page: 4     Date Filed: 07/25/2019
    No. 18-11553
    III.
    On appeal, Elias advances only one argument: that he sufficiently pled
    a claim of unjust enrichment. This is the only claim which Elias has preserved
    for review. He has waived his claims for theft of property, conversion of
    property, trespass to personal property, and trade secret misappropriation.
    See Audler v. CBC Innovis Inc., 
    519 F.3d 239
    , 255 (5th Cir. 2008).
    For the purposes of this appeal, we will assume that unjust enrichment
    is an independent cause of action under Texas law. 3 “A party may recover
    under the unjust enrichment theory when one person has obtained a benefit
    from another by fraud, duress, or the taking of an undue advantage.”
    Heldenfels Bros., Inc. v. City of Corpus Christi, 
    832 S.W.2d 39
    , 41 (Tex. 1992).
    Elias’s unjust enrichment theory can be summed up as follows. Piro set
    up a domain, magiclocksmith.net, that was confusingly similar to Elias’s Magic
    Locksmith mark, in which he had common law rights.                        According to the
    arbitrator’s    findings,     which     Elias       attached   to   his    complaint,     the
    magiclocksmith.net domain was registered in bad faith. Pilo’s bad faith in
    setting up the magiclocksmith.net domain constituted undue advantage. By
    3   Courts of appeals in Texas appear split on whether unjust enrichment is an
    independent cause of action. Compare Freeman v. Harleton Oil & Gas, Inc., 
    528 S.W.3d 708
    ,
    742 (Tex. App.-Texarkana 2017) (treating unjust enrichment as an independent cause of
    action), and Pepi Corp. v. Galliford, 
    254 S.W.3d 457
    , 460 (Tex. App.-Houston 2007) (“Unjust
    enrichment is an independent cause of action.”), with Spellmann v. Love, 
    534 S.W.3d 685
    ,
    693 (Tex. App.-Corpus Christi-Edinburg 2017) (“[C]ause of action for unjust enrichment . . .
    fails as a matter of law because it is not an independent cause of action.”), and R.M. Dudley
    Const. Co., Inc. v. Dawson, 
    258 S.W.3d 694
    , 703 (Tex. App.-Waco 2008) (“Unjust enrichment,
    itself, is not an independent cause of action.”). Although the Texas Supreme Court has
    referred to a “cause of action” or “claims” of unjust enrichment, it appears to have not yet
    resolved whether unjust enrichment is an independent cause of action or a “theory of liability
    that a plaintiff can pursue through several equitable causes of action.” Hancock v. Chicago
    Title Ins. Co., 
    635 F. Supp. 2d 539
    , 560 (N.D. Tex. 2009); see Fortune Prod. Co. v. Conoco, Inc.,
    
    52 S.W.3d 671
    , 683 (Tex. 2000) (“Unjust enrichment claims are based on quasi-contract);
    HECI Exploration Co. v. Neel, 
    982 S.W.2d 881
    , 891 (Tex. 1998) (“The third cause of action
    . . . was unjust enrichment.”). We need not resolve this issue today.
    4
    Case: 18-11553     Document: 00515049862       Page: 5   Date Filed: 07/25/2019
    No. 18-11553
    using the confusingly similar domain name, Pilo wrongfully deprived Elias of
    business without compensation. And, according to the Yelp reviews included
    in Elias’s complaint, customers were overcharged when they procured
    locksmithing services through magiclocksmith.net. But Elias does not allege
    that he suffered a specific loss.
    Elias has failed to state a claim for unjust enrichment. Although Elias
    has alleged that Pilo wrongfully used his mark and overcharged customers who
    procured locksmith services from magiclocksmith.net, he has not alleged that
    he was deprived of or is entitled to any of the compensation Pilo received from
    the website. We cannot infer, from the facts alleged in the complaint, that
    customers who used magiclocksmith.net would have instead purchased their
    locksmithing services from Elias (especially when Elias is in California and
    Pilo in Texas). Also absent are any allegations, except for the findings of an
    arbitrator in an uncontested proceeding, that Pilo was aware of Elias’s mark
    when he created the magiclocksmith.net domain. The Texas Supreme Court
    has cautioned that “[u]njust enrichment is not a proper remedy merely because
    it ‘might appear expedient or generally fair that some recompense be afforded
    for an unfortunate loss’ to the claimant.” Heldenfels 
    Bros., 832 S.W.2d at 42
    (quoting Austin v. Duval, 
    735 S.W.2d 647
    , 649 (Tex. App.-Austin 1987)). While
    it may be completely inappropriate that Pilo’s domain was similar to Elias’s
    mark, and regrettable that Pilo’s misuse of the mark resulted in unwarranted
    negative reviews on Elias’s Yelp page, Elias has failed to cite any authority
    suggesting that unjust enrichment is a proper remedy in this situation. Put
    concisely, the complaint fails to plausibly state that Pilo “has obtained a benefit
    from” Elias. Heldenfels 
    Bros., 832 S.W.2d at 41
    . The judgment of the district
    court is therefore
    AFFIRMED.
    5