2die4kourt v. Hillair Capital Mgmt., LLC , 692 F. App'x 366 ( 2017 )

FILED
NOT FOR PUBLICATION
MAY 26 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
2DIE4KOURT, a California corporation; No. 16-56217
et al.,
D.C. No.
Plaintiffs-Appellees, 8:16-cv-01304-JVS-DFM
v.
MEMORANDUM*
HILLAIR CAPITAL MANAGEMENT,
LLC, a Delaware Limited Liability
Company; et al.,
Defendants-Appellants.
Appeal from the United States District Court
for the Central District of California
James V. Selna, District Judge, Presiding
Argued and Submitted May 10, 2017
Pasadena, California
Before: WALLACE, CHRISTEN, and WATFORD, Circuit Judges.
Hillair Capital Management, LLC, Hillair Capital Investments, LP, Haven
Beauty, Inc., Neal Kaufman, and Sean McAvoy (collectively, Hillair) appeal from
the district court’s preliminary injunction barring them from using the trademarks
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
at issue in this case. We have jurisdiction pursuant to 28 U.S.C. § 1292(a)(1), and
we affirm.
Hillair argues that the district court should not have entered the preliminary
injunction in favor of Appellees 2Die4Kourt, Kimsaprincess, Inc., Khlomoney,
Inc., Kourtney Kardashian, Kim Kardashian West, and Khloe Kardashian
(collectively, Kardashians). We review the entry of a preliminary injunction for
abuse of discretion. Herb Reed Enters., LLC v. Fla. Entm’t Mgmt., Inc., 736 F.3d
1239, 1247 (9th Cir. 2013). “If the district court ‘identified and applied the correct
legal rule to the relief requested,’ we will reverse only if the court’s decision
‘resulted from a factual finding that was illogical, implausible, or without support
in inferences that may be drawn from the facts in the record.’” Id., quoting United
States v. Hinkson, 585 F.3d 1247, 1263 (9th Cir. 2009) (en banc).
A preliminary injunction is warranted where the moving party can establish
(1) “that [it] is likely to succeed on the merits,” (2) “that [it] is likely to suffer
irreparable harm in the absence of preliminary relief,” (3) “that the balance of
equities tips in [its] favor,” and (4) “that an injunction is in the public interest.” Id.,quoting Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). The district
court correctly identified this legal rule, so we turn now to the second part of the
abuse of discretion test.
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Hillair asserts that the district court abused its discretion by holding that the
Kardashians are likely to succeed on the merits of their trademark infringement and
state law right of publicity claims. We disagree. There is evidence in the record
showing that the parties’ licensing agreement (Agreement) contemplated that
Hillair would make quarterly royalty payments based on product sales. Although
the Kardashians were supposed to provide invoices for the royalty payments owed
to them, the Agreement states that their failure to do so did not affect their “rights
to receive the amounts due.” Therefore, the evidence supports a finding that the
amounts were “due” notwithstanding any failure to generate an invoice.
It is uncontested that Hillair never made any royalty payments, yet it
continued to use the Kardashians’ trademarks for the life of the Agreement and
even after its termination. A party to a contract cannot both refuse to perform its
obligations and continue to avail itself of the contract’s benefits, even if it believes
that the other party has breached. See Costandi v. AAMCO Automatic
Transmissions, Inc., 456 F.2d 941, 942–43 (9th Cir. 1972); see also S & R Corp. v.
Jiffy Lube Int’l, Inc., 968 F.2d 371, 376 (3d Cir. 1992). Accordingly, the district
court did not abuse its discretion in holding that the Kardashians had demonstrated
a likelihood of success on their claims.
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Nor was it an abuse of discretion to hold that Hillair had not shown a
likelihood of success on its affirmative defense of unclean hands. See Perfect 10,
Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1158 (9th Cir. 2007) (“[O]nce the
moving party has carried its burden of showing a likelihood of success on the
merits, the burden shifts to the non-moving party to show a likelihood that its
affirmative defense will succeed”). “To make out an unclean hands defense, a
trademark defendant ‘must demonstrate that the plaintiff’s conduct is inequitable
and that the conduct relates to the subject matter of its claims.’” Japan Telecom,
Inc. v. Japan Telecom Am. Inc., 287 F.3d 866, 870 (9th Cir. 2002), quoting
Fuddruckers, Inc. v. Doc’s B.R. Others, Inc., 826 F.2d 837, 847 (9th Cir. 1987).
“To show that a trademark plaintiff’s conduct is inequitable, defendant must show
that plaintiff used the trademark to deceive consumers.” Id., citing Dollar Sys., Inc.
v. Avcar Leasing Sys., Inc., 890 F.2d 165, 173 (9th Cir. 1989).
There is no evidence in the record to show that the Kardashians ever used
their trademarks to deceive consumers. Hillair’s attempt to cast the Kardashians’
alleged breaches of the Agreement as false advertising under section 43(a) of the
Lanham Act is rejected because Hillair has not identified a false or misleading
representation that the Kardashians made in advertising or promoting any product.
15 U.S.C. § 1125(a)(1); see also Twentieth Century Fox Film Corp. v. Marvel
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Enters., Inc., 277 F.3d 253, 259 (2d Cir. 2002) (“A licensee is not without recourse
under section 43(a) of the Lanham Act if its licensor makes false claims to promote
a competing product (or falsely disparages the licensee’s product)” (emphasis
added)). A breach of contract, standing alone, is not enough to invoke the clean
hands defense, Dollar Sys., Inc., 890 F.2d at 173, so the district court’s conclusion
was not “illogical, implausible, or without support in inferences that may be drawn
from the facts in the record.” Herb Reed Enters., 736 F.3d at 1247, quoting
Hinkson, 585 F.3d at 1263.
Hillair argues next that the district court incorrectly held that the balance of
equities favors the Kardashians. Hillair has presented evidence demonstrating that
it likely will be forced to shut down, terminate its employees, and default on its
obligations if it is enjoined from using the Kardashians’ trademarks. Such an
outcome qualifies as irreparable harm. Am. Passage Media Corp. v. Cass
Commc’ns, Inc., 750 F.2d 1470, 1474 (9th Cir. 1985). But when the harm
complained of results from a defendant’s allegedly infringing conduct, we have
nonetheless approved the entry of a preliminary injunction. Triad Sys. Corp. v. Se.
Express Co., 64 F.3d 1330, 1338 (9th Cir. 1995), superseded by statute on other
grounds, 17 U.S.C. § 117(c). The district court therefore did not abuse its
discretion in holding that the balance of equities favors the Kardashians.
5
To the extent Hillair challenges the district court’s conclusion that the
Kardashians demonstrated a likelihood of irreparable harm, we hold that the court
did not abuse its discretion. While irreparable harm may not be presumed based on
a likelihood of success in a trademark action, “[e]vidence of loss of control over
business reputation and damage to goodwill c[an] constitute irreparable harm.”
Herb Reed Enters., 736 F.3d at 1250. Here, there is evidence showing that Hillair
used the Kardashians’ trademarks after the termination of the Agreement to release
an unapproved line of cosmetics products. This is enough to support a finding, at
this early stage, that the Kardashians likely will lose some measure of control over
their business reputation in the absence of injunctive relief.
Finally, Hillair contends that the district court should have required the
Kardashians to post a bond under Federal Rule of Civil Procedure 65(c). “Rule
65(c) invests the district court ‘with discretion as to the amount of security
required, if any.’” Johnson v. Couturier, 572 F.3d 1067, 1086 (9th Cir. 2009),
quoting Jorgensen v. Cassiday, 320 F.3d 906, 919 (9th Cir. 2003). “[T]he
likelihood of success on the merits, as found by the district court, tips in favor of a
minimal bond or no bond at all.” Van De Kamp v. Tahoe Reg’l Planning Agency,
766 F.2d 1319, 1326 (9th Cir. 1985), amended, 775 F.2d 998 (9th Cir. 1985). The
district court therefore did not abuse its discretion.
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We emphasize that “[o]ur review of the district court’s findings . . . is, of
course, restricted to the limited record available to the district court when it granted
or denied the motion.” Sports Form, Inc. v. United Press Int’l, Inc., 686 F.2d 750,
753 (9th Cir. 1982). Consequently, “our disposition of this appeal will affect the
rights of the parties only until the district court renders judgment on the merits of
the case, at which time the losing party may again appeal.” Id. Thus, the legal
issues at that time may be different.
AFFIRMED.
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