Opinion
For Beats Electronics, LLC, Plaintiff: Adam M Sevell, Kai S Bartolomeo, Wendy J Ray, LEAD ATTORNEYS, David M Walsh, Morrison and Foerster LLP, Los Angeles, CA.
For Andre Young, p/k/a Dr. DRE, Plaintiff: David M Walsh, Morrison and Foerster LLP, Los Angeles, CA.
For Steven Lamar, ROAM, LLC, ROAM, Inc., Defendants: Stephen E Morrissey, LEAD ATTORNEY, Davida P Brook, Susman Godfrey LLP, Los Angeles, CA; Brian D Melton, PRO HAC VICE, Susman Godfrey LLP, Houston, TX.
Proceedings: (In Chambers) Order Re: Pending Motion
The Honorable Fernando M. Olguin, United States District Judge.
Having reviewed and considered all the briefing filed with respect to Defendants' Motion to Dismiss Plaintiffs' First Amended Complaint Pursuant to Federal Rule of Civil Procedure 12(b)(6) (" Motion"), the court concludes that oral argument is not necessary to resolve the Motion. See Fed.R.Civ.P. 78; Local Rule 7-15; Willis v. Pac. Mar. Ass'n, 244 F.3d 675, 684 n. 2 (9th Cir. 2001).
INTRODUCTION
On September 26, 2014, Beats Electronics, LLC (" Beats") filed a complaint against defendants Steven Lamar (" Lamar"), ROAM, LLC, ROAM, Inc. (together, " ROAM") (collectively, " defendants"), and Does 1-10. (See Complaint). On January 9, 2015, the court granted defendants' motion to dismiss. (See Court's Order of January 9, 2015). On January 23, 2015, Beats and new-party Andre Young p/k/a Dr. Dre (" Dr. Dre") (collectively, " plaintiffs") filed the operative First Amended Complaint (" FAC") against the same defendants, asserting claims for (1) false advertising, 15 U.S.C. § 1125(a); (2) unfair competition, 15 U.S.C. § 1125(a); (3) violation of California False Advertising Law (" FAL"), Cal. Bus. & Prof. Code § § 17500, et seq.; (4) violation of California Unfair Competition Law (" UCL"), Cal. Bus. & Prof. Code § § 17200, et seq.; (5) misappropriation of right of publicity, Cal. Civ. Code § 3344; and (6) common law misappropriation of right of publicity. (See FAC at ¶ ¶ 43-87).
BACKGROUND
I. PLAINTIFFS' ALLEGATIONS.
Beats, which was co-founded by Dr. Dre, an artist and producer, and Jimmy Iovine (" Iovine"), former Chairman of Interscope Geffen A& M Records (FAC at ¶ 17), developed " revolutionary headphones" branded " b" and " Beats by Dr. Dre." (Id.). " The 'Beats by Dr. Dre' trademark draws on Dr. Dre's famous name and image, as well as on the 'Dr. Dre' trademark." (Id.).
Capitalization, emphasis, alterations, and quotation marks in FAC altered without notation.
Lamar met Dr. Dre and Iovine in early 2006. At the time Dr. Dre and Iovine were working with a third-party manufacturer to design and develop a new headphone. (FAC at ¶ 18). Lamar proposed that his employer, SLS International, Inc. (" SLS"), " provide certain technology and financing for the initial headphone[, but s]oon after, it became clear to [] Iovine and Dr. Dre that Lamar could not deliver on his promises." (Id.). As a result, in July 2006, Dr. Dre and Iovine sued, among others, Lamar, SLS, and Jibe Audio, LLC (" Jibe Audio"), a company owned by Lamar. (See id. at ¶ ¶ 3 & 19). The parties reached a settlement on April 24, 2007, whereby " [a]ll rights, title, and interest in the headphone design and the trademark 'Beats by Dr. Dre' were assigned to Dr. Dre and [] Iovine, and eventually to Beats." (Id.). Since then, Dr. Dre and Iovine have had no further relationship with Lamar, SLS, or Jibe Audio. (See id.).
The initial " Studio" headphone was released in the fall of 2008. (FAC at ¶ 20). Since then, Beats' headphones and products " have enjoyed tremendous popularity and sales." (Id. at ¶ 21). The headphones have been " featured with Dr. Dre in commercials, " and have been endorsed by numerous performing artists and famous athletes. (Id.). According to plaintiffs, " [t]he use of Dr. Dre's name in the Beats by Dr. Dre trademark and the use of celebrity endorsements have given Beats' headphone products an aura of 'coolness' unique in the headphone market, which Defendants are attempting to capture through their false and misleading statements linking Defendants' planned new products to Beats and Dr. Dre." (Id.).
Plaintiffs allege that defendants " timed the announcement of their competing headphones to coincide with the enhanced publicity regarding Beats resulting from Apple's acquisition of Beats." (FAC at ¶ 23). More specifically, on September 4, 2014, ROAM issued two press releases announcing that it would be accepting pre-orders for its first headphone product -- ROPES -- which plaintiffs allege included a " misleading representation" that Lamar was a " cofounder" of Beats by Dr. Dre. (See id. at ¶ 24 & Exhs. 1-4). Plaintiffs allege additional misleading representations -- including that Lamar is a " Beats Electronics Co-Founder[, ]" that Jibe Audio is " responsible for the concept and design of the Beats by Dr. Dre headphone product line[, ]" and that Jibe Audio " was responsible for the concept, design, manufacturing and distribution of the Beats by Dr. Dre headphone product line" -- were made be defendants on Lamar's or ROAM's online presence, including the ROAM website, and Lamar's CrunchBase, LinkedIn, and Twitter profiles. (See FAC at ¶ ¶ 25-29 & Exhs. 5-10). Further, plaintiffs aver that third parties are being confused by defendants' repeated misrepresentations concerning Lamar and Jibe Audio's relationship with Beats and its headphones. (See FAC at ¶ 30). Plaintiffs allege that Lamar's company, Jibe Audio, " never manufactured or distributed any Beats headphones, nor was it responsible for the headphones' concept and design[, ]" and that Jibe Audio had not even been established prior to the filing of the first design patent application for the Beats' headphone products. (See id. at ¶ 32).
According to plaintiffs, in advertising ROPES, and describing Lamar as " co-Founder of Beats by Dr. Dre" on his new venture's website, defendants violated the Lanham Act, the FAL, and the UCL. (See FAC at ¶ ¶ 43-75). Moreover, through Lamar's use of the " co-Founder of Beats by Dr. Dre" description, defendants misappropriated Dr. Dre's identity under both common law and California Civil Code § 3344. ( See id. at ¶ ¶ 76-87).
The background facts and allegations are based on the FAC, Plaintiffs Beats Electronics, LLC and Andre Young's Opposition to Defendants' Motion to Dismiss First Amended Complaint (" Opp'n"), and Jibe Audio, LLC and Steven Lamar's Verified Amended Cross Complaint and Demand for Jury Trial (" Cross Complaint" or " Cross Compl."), filed in the state court action and of which defendants request judicial notice. (See Motion at 2 n. 1). Although the Cross Complaint is not identified in a separate request for judicial notice nor identified in the Declaration of Ravi Doshi in Support of Defendants' Motion to Dismiss Plaintiff's [sic] First Amended Complaint (" Ravi Decl."), defendants have attached an unsigned copy of the Cross Complaint to the Ravi Declaration as Exhibit 1. Plaintiffs do not expressly object to the court's reliance on the Cross Complaint and indeed cite to it in their opposition brief. (See, generally, Opp'n at 3-4 & 12). In any event " [a] court may take judicial notice of matters of public record without converting a motion to dismiss into a motion for summary judgment." See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (internal quotation marks omitted).
In July 2006, Dr. Dre and Iovine sued Lamar, SLS, Jibe Audio, and others, which resulted in a settlement in April 2007. (FAC at ¶ 19; Opp'n at 3). The settlement agreement recitals state that " Pentagram, Lamar, SLS, Jibe, Jimmy [Iovine] and/or Dre designed certain headphones as depicted on Schedule I to the Royalty Agreement . . . to be marketed and sold under certain names and trademarks including, but not limited to, 'Beats by Dr. Dre[.]'" (Cross Compl., Exh. B (Settlement and Mutual Release Agreement (" Settlement Agreement") at Recitals, C.). According to plaintiffs, under the terms of the Settlement Agreement, Lamar and Jibe Audio (and others) " assigned any rights they had in the Headphones Design (as defined in the agreement)" to Dr. Dre and Iovine, (Opp'n at 3, citing Settlement Agreement), and " [a]s consideration, Dr. Dre and [] Iovine entered into a Royalty Agreement with design firm Pentagram Design, Inc.[, ]" (" Pentagram"). (Id., citing Cross Compl. at Exh. C (" Royalty Agreement")). The Royalty Agreement provides for royalty payments to Pentagram. (Id., citing Royalty Agreement at § 1(b)). Lamar and Jibe Audio, who were not parties to the Royalty Agreement, (see id. at 4), entered into a separate agreement with Pentagram to divide the royalties received by Pentagram. (See id., citing Cross Compl. at Exh. D (Settlement and Mutual Release Agreement (" Pentagram-Lamar Settlement Agreement")).
Subsequently, in January 2014, Pentagram and its successor-in-interest filed a declaratory relief action in Los Angeles County Superior Court against Lamar, Jibe Audio, Beats, Dr. Dre, and Iovine (" state court action") seeking a determination of the parties' respective rights and obligations under the Settlement Agreement. (See Opp'n at 4).
The state court action is titled Hinrichs & Associates, et. al. v. Beats Electronics, LLC, et. al., LASC, Case No. BC 533089. (See Opp'n at 2; Cross Compl.).
Lamar and Jibe Audio filed a cross complaint against, among others, Dr. Dre, Iovine, and Beats on May 16, 2014, (see Opp'n at 4), and the operative Cross Complaint on December 29, 2014. (Id.). The Cross Complaint sets forth five claims for relief, three of which are asserted against Dr. Dre, Iovine, and Beats: breach of contract, declaratory relief, and an accounting. In support of their claims, Lamar and Jibe Audio alleged that in January 2006, Lamar " discussed [his] concept for celebrity musical artist-endorsed headphones with [] Iovine, " (Cross Compl. at ¶ 13), and later after engaging Pentagram " [t]o assist in developing the design and corporate identity for the line of headphones that would eventually be marketed and sold under the name 'Beats by Dr. Dre[, ]'" (id. at ¶ 15), Lamar and Pentagram " developed [the] design and branding concepts" including the " headphone product designs." (Id. at ¶ 16). In approximately " February 2006, Lamar and Pentagram presented their initial design and branding concepts to Iovine, Dre, and others at Interscope[, ]" (id.), and " [i]n the Spring of 2006, Lamar . . . founded Jibe Audio, which he planned to use as the company through which Beats Headphones would be marketed and sold to the general public." (Id. at ¶ 20). In addition, Lamar and Jibe Audio alleged that Lamar made several presentations to representatives from Apple and Monster, LLC regarding the Beats Headphones. (See id. at ¶ ¶ 23 & 25). Dr. Dre and Iovine filed the 2006 lawsuit after the relationship " soured[.]" (Id. at ¶ 26). The 2007 settlement resulted in three separate agreements -- the Settlement Agreement, the Royalty Agreement, and the Pentagram-Lamar Settlement Agreement (collectively, " settlement agreements"). (See id. at ¶ 27).
The court does not assume the truthfulness of the allegations in the Cross Complaint, and recites them here only for purposes of determining whether they are related to the present claims.
According to plaintiffs, " Lamar and Jibe Audio claim [in their Cross Complaint] that the Royalty Agreement encompasses the entire line of Beats headphones that have been designed and sold by Beats over the past seven years." (Opp'n at 4). Plaintiffs note that the Cross Complaint " does not mention the term 'co-founder, ' nor does Lamar's claimed entitlement to royalties depend on that description. Instead, it turns on whether Beats headphones sold after the initial Studio model are 'minor or cosmetic modifications in the design specifically identified on Schedule I' to the Settlement Agreement." (Id.).
LEGAL STANDARD
A motion to dismiss for failure to state a claim should be granted if plaintiff fails to proffer " enough facts to state a claim to relief that is plausible on its face." Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007); see Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009); Cook v. Brewer, 637 F.3d 1002, 1004 (9th Cir. 2011). " 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." Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949; Cook, 637 F.3d at 1004; Caviness v. Horizon Cmty. Learning Ctr., Inc., 590 F.3d 806, 812 (9th Cir. 2010). Although the plaintiff must provide " more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do, " Twombly, 550 U.S. at 555, 127 S.Ct. at 1965; see Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949; Cholla Ready Mix, Inc. v. Civish, 382 F.3d 969, 973 (9th Cir. 2004), cert. denied, 544 U.S. 974, 125 S.Ct. 1828, 161 L.Ed.2d 724 (2005) (" [T]he court is not required to accept legal conclusions cast in the form of factual allegations if those conclusions cannot reasonably be drawn from the facts alleged. Nor is the court required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.") (citations and internal quotation marks omitted), " [s]pecific facts are not necessary; the [complaint] need only give the defendant[s] fair notice of what the . . . claim is and the grounds upon which it rests." Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007) (per curiam) (citations and internal quotation marks omitted); see Twombly, 550 U.S. at 555, 127 S.Ct. at 1964.
In considering whether to dismiss a complaint, the court must accept the allegations of the complaint as true, Erickson, 551 U.S. at 93-94, 127 S.Ct. at 2200; Albright v. Oliver, 510 U.S. 266, 268, 114 S.Ct. 807, 810, 127 L.Ed.2d 114 (1994), construe the pleading in the light most favorable to the pleading party, and resolve all doubts in the pleader's favor. See Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 1849, 23 L.Ed.2d 404 (1969); Berg v. Popham, 412 F.3d 1122, 1125 (9th Cir. 2005). Dismissal for failure to state a claim can be warranted based on either a lack of a cognizable legal theory or the absence of factual support for a cognizable legal theory. See Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). A complaint may also be dismissed for failure to state a claim if it discloses some fact or complete defense that will necessarily defeat the claim. Franklin v. Murphy, 745 F.2d 1221, 1228-29 (9th Cir. 1984).
DISCUSSION
I. COMPULSORY CROSS-CLAIMS.
Defendants contend that this action should be dismissed because plaintiffs' claims should have been brought as compulsory cross-claims in the state court action. (See Motion at 8-13). Plaintiffs argue that the instant claims are not compulsory cross-claims and therefore need not have been brought in that action. (See Opp'n at 10-14).
" Federal courts will not permit an action to be maintained where the claims asserted should have been brought as a compulsory counterclaim in an earlier action[, ]" In re Crown Vantage, Inc., 421 F.3d 963, 973 n. 7 (9th Cir. 2005), including a state-court action. Cheiker v. Prudential Ins. Co., 820 F.2d 334, 336 (9th Cir. 1987). Whether " claims are compulsory counterclaims which should have been pleaded in [an] earlier . . . state court action is a question of state law." Pochiro v. Prudential Ins. Co. of Am., 827 F.2d 1246, 1249 (9th Cir. 1987).
Under California law, " if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded." Cal. Code Civ. P. § 426.30(a). California Code of Civil Procedure § 426.10 includes cross-complaints, Cal. Code Civ. P. § 426.10(a), and defines a related cause of action as one " which arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause of action which the plaintiff alleges in his complaint." Id. at § 426.10(c).
As California courts have noted, § 426.30 is similar to Federal Rule of Civil Procedure 13(a). See Align Tech., 179 Cal.App.4th at 960; Saunders v. New Capital for Small Businesses, Inc., 231 Cal.App.2d 324, 336, 41 Cal.Rptr. 703 (1964) (interpretation of the term " transaction" " parallels the interpretation of the same term found in the comparable Federal Rule of Civil Procedure on compulsory counter-claims"). All further " Rule" references are to the Federal Rules of Civil Procedure.
The purpose of California's compulsory cross-claim statute is to avoid piecemeal litigation. Align Tech., Inc. v. Tran, 179 Cal.App.4th 949, 959, 102 Cal.Rptr.3d 343 (2009). The Supreme Court of California has observed that the " law abhors a multiplicity of actions, and the obvious intent of the [California] Legislature in enacting the counterclaim statutes . . . was to provide for the settlement, in a single action, of all conflicting claims between the parties arising out of the same transaction." Flickinger v. Swedlow Eng'g Co., 45 Cal.2d 388, 393, 289 P.2d 214 (1955) (referring to predecessor to § 426.30); Align Tech., 179 Cal.App.4th at 959 (same). " Thus, a party cannot by negligence or design withhold issues and litigate them in successive actions; he may not split his demands or defenses; he may not submit his case in piecemeal fashion." Flickinger, 45 Cal.2d at 393.
" Because of the liberal construction given to the statute to accomplish its purpose of avoiding a multiplicity of actions, 'transaction' is construed broadly; it is not confined to a single, isolated act or occurrence but may embrace a series of acts or occurrences logically interrelated." Align Tech., 179 Cal.App.4th at 960 (internal quotation and alteration marks omitted); see Currie Med. Specialties, Inc. v. Bowen, 136 Cal.App.3d 774, 777, 186 Cal.Rptr. 543 (1982) (" California courts have . . . adopted the expansive logical relation test[.]"). The logical relation test does not require " an absolute identity of factual backgrounds for the two claims, but only a logical relationship among them." Currie Med., 136 Cal.App.3d at 777; see In re Price, 42 F.3d 1068, 1073 (7th Cir. 1994) (" The pertinent inquiry is whether the claim arises out of the same transaction or occurrence and not whether the claims are from the same transaction or occurrence."). " At the heart of the approach is the question of duplication of time and effort; i.e., are any factual or legal issues relevant to both claims?" Currie Med., 136 Cal.App.3d at 777; Align Tech., 179 Cal.App.4th at 960 (same).
Here, the claims in the present action are logically related to the claims in the state court action as both sets of claims arise from the parties' working relationship in 2006 relating to the conceptualization and design of the Beats headphones. That working relationship -- whether characterized as inconsequential and fleeting, (see FAC at ¶ 4), or instrumental and significant (see Cross Compl. at ¶ ¶ 13-25) -- and the resulting settlement agreements, are central to Lamar's breach of contract claim seeking unpaid royalties. (See id. at ¶ ¶ 13-65). The 2006 working relationship is also central to the claims made in the instant action, particularly as to defendants' defenses.
As plaintiffs allege, while Dr. Dre and Iovine were working with a manufacturer to design and develop the Beats headphones in early 2006, they were introduced to Lamar, who proposed that his then-employer " provide certain technology and financing for the initial headphone." (See FAC at ¶ 18). After it became clear to Dr. Dre and Iovine that Lamar could not deliver on his promises, they sued Lamar, SLS, Jibe Audio, and others in July 2006. (See id. at ¶ ¶ 18-19). The parties ultimately settled that lawsuit, (see id. at ¶ 19), and entered into the Settlement Agreement pursuant to which " Lamar and Jibe Audio, among others, assigned any rights they had in the Headphones Design" to Dr. Dre and Iovine. (See Opp'n at 3). As consideration, Dr. Dre and Iovine entered into the Royalty Agreement with Pentagram, ( see id. at 3-4; Royalty Agreement), and Lamar and Jibe Audio entered into the Pentagram-Lamar Settlement Agreement whereby the parties divided the royalties received by Pentagram. (See Opp'n at 3-4; Pentagram-Lamar Settlement Agreement). Lamar and Jibe Audio's breach of contract claim against Dr. Dre, Iovine, and Beats in the state court action is based on the 2006 working relationship that spurred the 2006 lawsuit and the resulting settlement agreements. (See Cross Compl. at ¶ ¶ 13-30 (allegations regarding the 2006 working relationship and resulting lawsuit and settlement). It appears from the Cross Complaint that Lamar is alleging he had a greater role in the design of the Beats headphones, (see id.), and that Dr. Dre, Iovine, and Beats have breached the settlement agreements by withholding royalty payments in connection with models of the headphones issued after the initial Studio headphone. ( See id. at ¶ ¶ 13-65).
The federal claims also arise out of the 2006 working relationship, as well as the settlement agreements, since defendants are defending this action by contending that " they cannot be liable for false advertising and unfair competition for describing [] Lamar as a 'co-founder of Beats by Dr. Dre, ' or Jibe Audio as having 'design[ed]' Beats headphones, because as made evident by the settlement agreement and the context of its creation, [] Lamar was, in fact, a co-founder of the headphone brand, and [] Lamar and Jibe Audio were responsible for its concept and design." (Motion at 11, citing Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997) (element of Lanham Act claim for false advertising is a false statement of fact)). For instance, the Settlement Agreement states that " Pentagram, Lamar, SLS, Jibe, Jimmy [Iovine] and/or Dre designed certain headphones as depicted on Schedule I to the Royalty Agreement . . . to be marketed and sold under certain names and trademarks including, but not limited to, 'Beats by Dr. Dre[.]'" (Settlement Agreement at Recitals, C.). Clearly, Lamar's and Jibe Audio's role in designing the headphones, which arise from the 2006 working relationship, will be critical in this action. Thus, the claims in the state court action and the present action arise from the same transaction or series of transactions. See, e.g., Saunders, 231 Cal.App.2d at 336 (" [T]he term 'transaction' . . . is not confined to a single, isolated act or occurrence such as, for example, a contract, a lease, or an automobile collision[, ] but may embrace a series of acts or occurrences logically interrelated.") (citations omitted).
Plaintiffs contend that " [t]he 'logical relationship' test cited by Defendants has been applied in the breach of contract context[, ]" and that the " claims in this case are not 'based on the same contract' that is at issue" in the state court action. (See Opp'n at 11, citing Frog Creek Partners, LLC v. Vance Brown, Inc., 206 Cal.App.4th 515, 538, 141 Cal.Rptr.3d 834 (2012) (" In the breach of contract context, the rule means any claims the defendant has against the plaintiff based on the same contract generally must be asserted in a cross-complaint, even if the claims are unrelated to the specific breach or breaches that underlie the plaintiff's complaint."). To the extent plaintiffs contend that the claims in this action must be based on the settlement agreements, they read the logical relationship test too narrowly. Claims are logically related when a contract is the basis for both sets of claims, see Align Tech., 179 Cal.App.4th at 962, but there is nothing in the language of the California statute or interpreting case law that limits the logically related test to contract claims or claims solely based upon or arising from the subject contract. The relevant inquiry is whether the claims are logically related, that is, whether there " are any factual or legal issues relevant to both [sets of] claims[.]" Currie Med., 136 Cal.App.3d at 777; see Align Tech., 179 Cal.App.4th at 960 (same). As noted above, " the term 'transaction' . . . is not confined to a single, isolated act or occurrence such as, for example, a contract, a lease, or an automobile collision[, ] but may embrace a series of acts or occurrences logically interrelated." Saunders, 231 Cal.App.2d at 336 (citations omitted) (emphasis added).
Moreover, plaintiffs' contention that Currie Med., 136 Cal.App.3d 774, 186 Cal.Rptr. 543, and Albright, 362 F.2d 928, are distinguishable because " the underlying conduct occurred after the parties entered into the relevant contract[, ]" (Opp'n at 11) (emphasis in original), is unpersuasive. As defendants note, (see Defendants' Reply in Support of Motion to Dismiss Plaintiffs' First Amended Complaint at 9), these cases do not view the logical relationship test in terms of the temporal sequence of the events at issue. Nor have plaintiffs cited cases in support of such a proposition. (See, generally, Opp'n at 10-14).
As discussed above, the claims in the state court action and the present action arise from the 2006 working relationship relating to the conceptualization and design of the Beats headphones. While there are differences between the claims in the state court action and the present action, (see Opp'n at 12-13), that is not necessarily the case with respect to the underlying facts. See Currie Med., 136 Cal.App.3d at 777 (test does " not [require] an absolute identity of factual backgrounds for the two claims, but only a logical relationship between them"); see Albright, 362 F.2d at 929 (" Two bundles of facts seldom are identical for comparing 'transactions, ' and so close judgments must be made from time to time."). Despite the variance in claims, the nature and history of the relationship between the parties is critical to a determination of the various claims. In other words, the claims are logically related.See Eagle Precision Techs., Inc. v. Eaton Leonard Robolix, Inc., 2005 WL 6453556, * 5 (S.D. Cal. 2005) (" [A]ll of the claims made arise out of the same business relationship established between the parties when [one party] was formed. While the specific proof necessary for each claim might differ, one essential element that must be dealt with in the action is the nature and history of that relationship."); Align Tech., 179 Cal.App.4th at 962 (concluding claims are logically related where they " arose out of the employment relationship between the parties"). California state courts (and federal courts through Rule 13(a)) have made clear that the compulsory cross-claim statute is expansive and should be liberally construed to effectuate its purpose of avoiding piecemeal litigation. See Align Tech., 179 Cal.App.4th at 959 (" In furtherance of [the] intent of avoiding a multiplicity of actions, numerous cases have held that the compulsory cross-complaint statute . . . must be liberally construed to effectuate its purpose."); Currie Med., 136 Cal.App.3d at 777 (" California courts have . . . adopted the expansive logical relation test[.]"); Albright v. Gates, 362 F.2d 928, 929 (9th Cir. 1966) (" In deciding what is a transaction, [court] take[s] note that the term gets an increasingly liberal construction."). Here, given the liberal interpretation that must be given to California's compulsory cross-claim statute, the court is persuaded that plaintiffs' claims in the present action should have been brought as compulsory cross-claims in the state court action. Accordingly, the claims will be dismissed without prejudice.
With respect to plaintiffs' contention that the ROAM entities are not parties to the state court action, (Opp'n at 13), the court notes that the wrongful conduct alleged in this case is the series of false statements that Lamar is a co-founder of Beats by Dr. Dre. ROAM's liability would appear tied to Lamar's liability. (See FAC at ¶ ¶ 24, 26-27, 31, 34-35). The court, therefore, does not find the presence of these defendants significant. Moreover, while plaintiffs cite to two cases finding that claims on underlying debts were not compulsory counterclaims to claims made pursuant to the Fair Debt Collection Practices Act (" FDCPA"), see Hart v. Clayton-Parker and Assocs., Inc., 869 F.Supp. 774, 777-78 (D. Ariz. 1994); Campos v. W. Dental Servs., Inc., 404 F.Supp.2d 1164, 1169 (N.D. Cal. 2005), the court in Currie Med. held that a Lanham Act claim was logically related to a breach of contract claim. See 136 Cal.App.3d at 776-77. If the present case and the state court action involved FDCPA claims, the court would find Hart and Campos relevant.
Because of this determination, the court does not address defendants' contention that plaintiffs' claims for commercial misappropriation should be dismissed for failure to state a claim. (See Motion at 5-8).
II. DISMISSAL WITHOUT LEAVE TO AMEND.
Rule 15 provides that the court " should freely give leave [to amend] when justice so requires." Fed.R.Civ.P. 15(a)(2); see Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990) (The policy favoring amendment must " be applied with extreme liberality."). However, " [i]t is settled that the grant of leave to amend the pleadings pursuant to Rule 15(a) is within the discretion of the trial court." Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330, 91 S.Ct. 795, 802, 28 L.Ed.2d 77 (1971). This decision is guided by an examination of several factors, including: (1) whether the amendment causes the opposing party undue prejudice; (2) whether the amendment is sought in bad faith; (3) whether the amendment causes undue delay; (4) whether the amendment constitutes an exercise in futility; and (5) whether the plaintiff has previously amended his or her complaint. See DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 & n. 3 (9th Cir. 1987).
Having liberally construed and assumed the truth of the allegations in the FAC, the court is persuaded that plaintiffs claims cannot be saved through amendment. Under the circumstances, it would be futile to afford plaintiffs a third opportunity to state a claim given that their claims should have been filed as compulsory cross-claims in the state court action. See Cafasso, United States ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1058 (9th Cir. 2011) (" [T]he district court's discretion to deny leave to amend is particularly broad where plaintiff has previously amended the complaint."); Wagh v. Metris Direct, Inc., 363 F.3d 821, 830 (9th Cir. 2003) (same), cert. denied, 541 U.S. 1043, 124 S.Ct. 2176, 158 L.Ed.2d 733 (2004), overruled on other grounds, Odom v. Microsoft Corp., 486 F.3d 541, 551 (9th Cir.) (en banc), cert. denied, 552 U.S. 985, 128 S.Ct. 464, 169 L.Ed.2d 325 (2007). Accordingly, plaintiffs claims will be dismissed without leave to amend.
This order is not intended for publication. Nor is it intended to be included in or submitted to any online service such as Westlaw or Lexis.
CONCLUSION
Based on the foregoing, IT IS ORDERED that defendants' Motion to Dismiss Plaintiffs' First Amended Complaint (Document No. 30) is granted. Judgment shall be entered accordingly.