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Case 2:14-cv-07537-FMO-MRW Document 43 Filed 08/31/15 Page 1 of 10 Page ID #:694

UNITED STATES DISTRICT COURT


CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 14-7537 FMO (MRWx)

Title

Beats Electronics, LLC v. Steven Lamar, et al.

Present: The Honorable

Date

August 31, 2015

Fernando M. Olguin, United States District Judge

Vanessa Figueroa

None

None

Deputy Clerk

Court Reporter / Recorder

Tape No.

Attorney Present for Plaintiff(s):

Attorney Present for Defendant(s):

None Present

None Present

Proceedings:

(In Chambers) Order Re: Pending Motion

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. Assn, 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 Courts 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),1 developed
revolutionary headphones branded b and Beats by Dr. Dre. (Id.). The Beats by Dr. Dre
trademark draws on Dr. Dres famous name and image, as well as on the Dr. Dre trademark.

Capitalization, emphasis, alterations, and quotation marks in FAC altered without notation.

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Case 2:14-cv-07537-FMO-MRW Document 43 Filed 08/31/15 Page 2 of 10 Page ID #:695

UNITED STATES DISTRICT COURT


CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 14-7537 FMO (MRWx)

Title

Beats Electronics, LLC v. Steven Lamar, et al.

Date

August 31, 2015

(Id.).
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.
Dres 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 Apples 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 Lamars or ROAMs
online presence, including the ROAM website, and Lamars 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 Audios
relationship with Beats and its headphones. (See FAC at 30). Plaintiffs allege that Lamars
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 ventures website, defendants violated the Lanham Act, the FAL, and
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Case 2:14-cv-07537-FMO-MRW Document 43 Filed 08/31/15 Page 3 of 10 Page ID #:696

UNITED STATES DISTRICT COURT


CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 14-7537 FMO (MRWx)

Title

Beats Electronics, LLC v. Steven Lamar, et al.

Date

August 31, 2015

the UCL. (See FAC at 43-75). Moreover, through Lamars use of the co-Founder of Beats
by Dr. Dre description, defendants misappropriated Dr. Dres identity under both common law and
California Civil Code 3344. (See id. at 76-87).
II.

PRIOR LITIGATION.2

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; Oppn 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, (Oppn 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

The background facts and allegations are based on the FAC, Plaintiffs Beats Electronics,
LLC and Andre Youngs Opposition to Defendants Motion to Dismiss First Amended Complaint
(Oppn), and Jibe Audio, LLC and Steven Lamars 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 Plaintiffs [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 courts reliance on the Cross
Complaint and indeed cite to it in their opposition brief. (See, generally, Oppn 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).
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Case 2:14-cv-07537-FMO-MRW Document 43 Filed 08/31/15 Page 4 of 10 Page ID #:697

UNITED STATES DISTRICT COURT


CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 14-7537 FMO (MRWx)

Title

Beats Electronics, LLC v. Steven Lamar, et al.

Date

August 31, 2015

Iovine (state court action)3 seeking a determination of the parties respective rights and
obligations under the Settlement Agreement. (See Oppn at 4).
Lamar and Jibe Audio filed a cross complaint against, among others, Dr. Dre, Iovine, and
Beats on May 16, 2014, (see Oppn 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 alleged4 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).
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. (Oppn at 4). Plaintiffs note that the Cross
Complaint does not mention the term co-founder, nor does Lamars 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 Atl. Corp. v. Twombly, 550

The state court action is titled Hinrichs & Associates, et. al. v. Beats Electronics, LLC, et.
al., LASC, Case No. BC 533089. (See Oppn at 2; Cross Compl.).
4

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.
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Case 2:14-cv-07537-FMO-MRW Document 43 Filed 08/31/15 Page 5 of 10 Page ID #:698

UNITED STATES DISTRICT COURT


CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 14-7537 FMO (MRWx)

Title

Beats Electronics, LLC v. Steven Lamar, et al.

Date

August 31, 2015

U.S. 544, 570, 127 S.Ct. 1955, 1974 (2007); see Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct.
1937, 1949 (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 (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 (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 (1994), construe the pleading in the light most favorable to the pleading
party, and resolve all doubts in the pleaders favor. See Jenkins v. McKeithen, 395 U.S. 411, 421,
89 S.Ct. 1843, 1849 (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 Oppn 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).
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UNITED STATES DISTRICT COURT


CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 14-7537 FMO (MRWx)

Title

Beats Electronics, LLC v. Steven Lamar, et al.

Date

August 31, 2015

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).5 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).
The purpose of Californias compulsory cross-claim statute is to avoid piecemeal litigation.
Align Tech., Inc. v. Tran, 179 Cal.App.4th 949, 959 (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 Engg Co., 45 Cal.2d 388, 393 (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 (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

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 (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.
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UNITED STATES DISTRICT COURT


CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 14-7537 FMO (MRWx)

Title

Beats Electronics, LLC v. Steven Lamar, et al.

Date

August 31, 2015

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 Lamars
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 Oppn 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 Oppn at 3-4; Pentagram-Lamar
Settlement Agreement). Lamar and Jibe Audios 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, Lamars and Jibe Audios
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
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Case 2:14-cv-07537-FMO-MRW Document 43 Filed 08/31/15 Page 8 of 10 Page ID #:701

UNITED STATES DISTRICT COURT


CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 14-7537 FMO (MRWx)

Title

Beats Electronics, LLC v. Steven Lamar, et al.

Date

August 31, 2015

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 Oppn at 11, citing Frog Creek Partners,
LLC v. Vance Brown, Inc., 206 Cal.App.4th 515, 538 (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 plaintiffs 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, and Albright, 362
F.2d 928, are distinguishable because the underlying conduct occurred after the parties entered
into the relevant contract[,] (Oppn 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, Oppn 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 Oppn 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

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UNITED STATES DISTRICT COURT


CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 14-7537 FMO (MRWx)

Title

Beats Electronics, LLC v. Steven Lamar, et al.

Date

August 31, 2015

various claims. In other words, the claims are logically related.6 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 Californias 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.7
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.

With respect to plaintiffs contention that the ROAM entities are not parties to the state
court action, (Oppn 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. ROAMs liability would
appear tied to Lamars 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.
7

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).
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Case 2:14-cv-07537-FMO-MRW Document 43 Filed 08/31/15 Page 10 of 10 Page ID #:703

UNITED STATES DISTRICT COURT


CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 14-7537 FMO (MRWx)

Date

Title

Beats Electronics, LLC v. Steven Lamar, et al.

August 31, 2015

321, 330, 91 S.Ct. 795, 802 (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 courts 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 (2004), overruled on other grounds, Odom v. Microsoft
Corp., 486 F.3d 541, 551 (9th Cir.) (en banc), cert. denied, 552 U.S. 985 (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.

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