Opinion
C087007
03-24-2020
REDDING GASTROENTEROLOGY, LLC, Plaintiff and Respondent, v. PARAMVIR SINGH et al., Defendants and Appellants.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 185903)
Plaintiff and cross-defendant Redding Gastroenterology, LLC (plaintiff) sued defendants and cross-complainants Paramvir Singh and Paramvir Singh, Inc. doing business as Redding Gastroenterology (collectively defendants) for breach of fiduciary duty and violation of Business and Professions Code section 17200 (the unfair competition law) principally to preclude defendants from using the name Redding Gastroenterology in their business. Defendants in turn sued Redding Gastroenterology, LLC and Gaddam Reddy (collectively cross-defendants) for violation of the unfair competition law, seeking, among other things, an order requiring cross-defendants to remove the registration of Redding Gastroenterology as a fictitious business name with the California Medical Board and precluding them from using or registering the name in the future.
All further section references are to the Business and Professions Code unless otherwise specified.
Following a bench trial, the trial court ruled in favor of plaintiff on its first cause of action, but found plaintiff did not meet its burden regarding monetary damages on its second cause of action. The trial court ruled against defendants on their cross-complaint. The trial court issued an injunction under section 17200 permanently enjoining defendants from using the name Redding Gastroenterology and requiring them to relinquish any rights therein. The trial court further awarded plaintiff and Reddy attorney fees and costs.
Defendants raise the following arguments on appeal: (1) the trial court abused its discretion in admitting the testimony of Jeanne Vance as an expert on the subject of damages; (2) the trial court erred in finding defendants breached their fiduciary duty to plaintiff; (3) the trial court erred in finding defendants committed an unfair business practice under the unfair competition law; (4) the trial court erred in ruling in favor of plaintiff on the cross-complaint; and (5) the trial court abused its discretion in denying an injunction against plaintiff's efforts to register the name Redding Gastroenterology.
As to plaintiff's breach of fiduciary duty cause of action, we agree with plaintiff that the trial court ruled against it; we, therefore, do not consider defendants' arguments relating to that cause of action. As to plaintiff's unfair competition law cause of action, we conclude there is insufficient evidence to support the trial court's judgment in favor of plaintiff because it introduced no evidence showing the name Redding Gastroenterology, LLC has acquired a secondary meaning entitling it to relief under section 17200. We accordingly reverse the judgment in favor of plaintiff on its complaint. We also reverse the award of attorney fees and costs to plaintiff and remand the matter to the trial court with directions to reconsider the award in light of the result on appeal.
We affirm the judgment against defendants on their cross-complaint because they failed to present an argument with citation to the record and authority affirmatively demonstrating error.
FACTUAL AND PROCEDURAL BACKGROUND
We discuss only the facts pertinent to the disposition of this appeal.
Plaintiff is a limited liability company registered with the California Secretary of State; it filed its articles of incorporation in 2008, a statement of information in 2011, and a statement of no change in 2016. Plaintiff is owned by several physicians, including Reddy. At the time of trial, there were approximately seven gastroenterologists in Redding.
Plaintiff and AmSurg Holdings (AmSurg) own Gastroenterology Associates Endoscopy Center (Associates), which owns and operates Redding Endoscopy Center (the Center). The income from the Center is shared between plaintiff and AmSurg; plaintiff then distributes its portion of the income to its members.
Associates procures the necessary licenses for the Center from state and federal regulatory agencies. The license documents introduced at trial identify the licensee as Associates and/or the Center. Associates identifies plaintiff as an owner on the license applications. Plaintiff's expert, Vance, testified that, when a licensee's owner's name changes, some regulatory agencies require the licensee to update the information on its license application.
The trial court's ruling after submission states plaintiff "is required to be registered and/or licensed through a number of regulatory entities," and "has been and continues to be licensed" through several regulatory agencies. There is no such evidence in the record. Reddy testified Associates applies for the licenses and identifies plaintiff as an owner in the license applications. Plaintiff is not referenced on any of the license documents introduced at trial.
Singh purchased a membership interest in plaintiff from Reddy in November 2015. In doing so, Singh agreed to be bound by a fiduciary duty clause providing each member of plaintiff "shall have a fiduciary duty to act at all times in a manner such [p]erson reasonably believes to be in the best interest of [plaintiff], in good faith and with the care an ordinary prudent person in a like position would exercise under similar circumstances." At the time of trial, Singh was still a member of plaintiff and was receiving a monthly member payment.
This dispute arose in April 2016, when defendants started their own practice under the name Redding Gastroenterology. Plaintiff requested that defendants cease using the name to avoid confusion but defendants refused. Defendants obtained a fictitious business name statement for Redding Gastroenterology from Shasta County, purchased a sign for the office and created a Web site under that name, and purchased advertising promoting the name. Defendants estimated they had spent $20,000 to $25,000 in advertising by November 2017. Defendants did not, however, register the fictitious business name with the California Medical Board, as required under section 2415.
Reddy registered the fictitious business name Redding Gastroenterology with the California Medical Board in late July 2016 and received it a month later. He registered the name to "protect the name from anybody else using it" and out of concern regarding potential liability for the Center associated with defendants' use of the name. When Reddy registered the name, he knew defendants had used Redding Gastroenterology on their Web site and that his registration of the name would preclude them from registering the same name with the California Medical Board. That is exactly what happened; when defendants attempted to register Redding Gastroenterology with the California Medical Board in August 2016, they were unable to do so. Despite the inability to register the name as required under section 2415, however, defendants were still using the name Redding Gastroenterology for their business at the time of trial -- in November 2017.
Plaintiff filed suit against defendants asserting two causes of action: (1) violation of the unfair competition law; and (2) breach of fiduciary duty. Both causes of action arose from defendants' use of the name Redding Gastroenterology. Defendants filed a cross-complaint against cross-defendants for violation of the unfair competition law arising out of Reddy's registration of Redding Gastroenterology with the California Medical Board. The actions went to a bench trial in November 2017.
At trial, Vance testified defendants' use of the name Redding Gastroenterology presented a risk to plaintiff "from a licensing and regulatory standpoint" based on defendants' failure to file a fictitious business name registration with the California Medical Board, prior disciplinary allegations against Singh, and defendants' failure to notify Medicare and Medi-Cal about their use of a fictitious business name. She explained regulatory agencies could confuse the two entities, presenting a risk that payments to plaintiff would be frozen during an agency's investigation of defendants. Vance estimated it would take approximately six months and cost plaintiff approximately $10,000 plus some filing costs to change its name with all pertinent regulatory agencies. Plaintiff's counsel echoed the "risk" associated with defendants' use of the designation, explaining: "This is -- we're not even claiming that Redding Gastroenterology, LLC is out there advertising and using this name openly and out to the public in trying to promote it. But -- but there is a very real risk in having both of these entities use the name."
As to the cross-complaint, Singh testified that, although he was not "directly harmed" by Reddy's registration of Redding Gastroenterology with the California Medical Board, he believed "there could be potential harm in the future if the Medical Board of California feels that action needs to be taken because [he is] practicing without having registered that name with the Medical Board." Further, in estimating what it would cost defendants to change the name of their business, Singh estimated it would cost $20,000 or more based on having to apply for and advertise the new name. Singh testified no one had ever expressed confusion as to the name Redding Gastroenterology and that no one knows the name Redding Gastroenterology, LLC in the public. Although there was no mention of good will in Singh's testimony, defendants' counsel asserted in closing argument that defendants have some good will in the name.
As to the complaint, the trial court found defendants' use of the name Redding Gastroenterology was in violation of section 2415 and a breach of Singh's fiduciary duty to plaintiff, constituting an unfair business practice under section 17200. The court further found defendants' continued use of the name presents "an ongoing and continued risk or liability." It permanently enjoined defendants from using the name Redding Gastroenterology and ordered them to relinquish any rights to use it, including its fictitious business name registration in Shasta County. Turning to the breach of fiduciary duty cause of action, the trial court found plaintiff "established by a preponderance of the evidence that . . . Singh had a fiduciary duty and breached that fiduciary duty" but failed to establish any monetary damages, an essential element of the cause of action.
As to the cross-complaint, the trial court found defendants had failed to meet their burden of proof to establish the cross-defendants took actions "which would constitute an unfair, deceptive, or unlawful practice which would tend to confuse consumers." The trial court awarded attorney fees and costs to plaintiff and Reddy.
DISCUSSION
I
The Unfair Competition Law Causes Of Action
Section 17200 provides that "unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." Because the statute " 'is written in the disjunctive, it establishes three varieties of unfair competition -- acts or practices which are unlawful, or unfair, or fraudulent. "In other words, a practice is prohibited as 'unfair' or 'deceptive' even if not 'unlawful' and vice versa." ' " (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.)
Section 17200 "governs 'anti-competitive business practices' as well as injuries to consumers, and has a major purpose 'the preservation of fair business competition.' [Citations.] By proscribing 'any unlawful' business practice, 'section 17200 "borrows" violations of other laws and treats them as unlawful practices' that the [unfair competition law] makes independently actionable." (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., supra, 20 Cal.4th at p. 180.) "[A] practice may violate the [unfair competition law] even if it is not prohibited by another statute." (Zhang v. Superior Court (2013) 57 Cal.4th 364, 370.)
" 'To achieve its goal of deterring unfair business practices in an expeditious manner, the Legislature limited the scope of the remedies available under the [unfair competition law]. "A[n] [unfair competition law] action is equitable in nature; damages cannot be recovered." ' [Citation.] 'Injunctions are "the primary form of relief available under the [unfair competition law] to protect consumers from unfair business practices," while restitution is a type of "ancillary relief." ' [Citation.] Restitution is available 'to restore to any person in interest any money or property . . . which may have been acquired by means of such unfair competition.' " (In re Tobacco Cases II (2015) 240 Cal.App.4th 779, 790.)
We review a trial court's exercise of its injunctive powers pursuant to section 17203 under an abuse of discretion standard. (In re Tobacco Cases II, supra, 240 Cal.App.4th at p. 790.) Under this standard, we review the trial court's findings of fact for substantial evidence and its conclusions of law de novo; its application of the law to the facts is reversible only if arbitrary and capricious. (Ibid.)
Standing to assert a claim under the unfair competition law is limited to "a person who has suffered injury in fact and has lost money or property as a result of the unfair competition." (§ 17204.) To satisfy section 17204's standing requirement a party must: "(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice . . . that is the gravamen of the claim." (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322.) Here, both plaintiff and defendants claim a property right in the name Redding Gastroenterology -- neither claims to have lost money as a result of the other's unfair competition.
"A sine qua non of protection of titles on a theory of unfair competition is the establishment by the plaintiff of a secondary meaning in his title." (Gordon v. Warner Bros. Pictures, Inc. (1969) 269 Cal. App.2d 31, 35.) California courts have long held that the user of a generic, descriptive, personal, or geographical name that has acquired a secondary meaning can obtain protection under the unfair competition law. (See Academy of Motion Picture Arts & Sciences v. Benson (1940) 15 Cal.2d 685, 688-692; California Western School of Law v. California Western University (1981) 125 Cal.App.3d 1002, 1009 [equity will grant protection appropriate to the circumstances where geographical, generic, or descriptive words acquire a secondary meaning]; Colvig v. KSFO (1964) 224 Cal.App.2d 357, 368 [the law of unfair competition protects names and designations under the doctrine of secondary meaning]; Family Record Plan, Inc. v. Mitchell (1959) 172 Cal.App.2d 235, 242-243 ["generic or descriptive words can acquire a secondary meaning"]; Industrial Photo Service v. Kelly (1961) 198 Cal.App.2d 665, 668 [under state law, a particular combination of "[g]eneric terms will be protected, once a secondary meaning has attached"].)
A name acquires a secondary meaning when " ' "a substantial number of present or prospective [customers] understand the designation, when used in connection with goods, services or a business, not in its primary lexicolographical sense, but as referring to a particular person or association." ' " (California Western School of Law v. California Western University, supra, 125 Cal.App.3d at p. 1009.) Stated another way, "[a] name or designation has a secondary meaning when it has been used so long or in such a way that the public has come to associate it with the person using it, and the criterion as to whether such secondary meaning exists depends on whether the public is likely to be deceived." (Colvig v. KSFO, supra, 224 Cal.App.2d at pp. 368-369.)
"[W]hether a name has acquired a secondary meaning is a question of fact." (California Western School of Law v. California Western University, supra, 125 Cal.App.3d at p. 1009; see North Carolina Dairy Foundation, Inc. v. Foremost-McKesson, Inc. (1979) 92 Cal.App.3d 98, 109.) " 'Facts which are relevant in proving the existence of secondary meaning include the duration and continuity of the use of the name [citations]; the extent of advertising and promotion of the name and the sums spent therefor [citations]; sales figures showing the number of people who have purchased plaintiff's named product [or services] [citation]; and identification of plaintiff's and defendant's respective markets or marketing areas [citation].' " (North Carolina Dairy Foundation, Inc., at pp. 109-110.)
The concept of secondary meaning under the unfair competition law mirrors the requirement of special significance to establish the existence of a trade name. Indeed, " '[a] designation is a trade name only if . . . it has acquired a special significance as a name of the goods, services or business of one person. Until the designation has acquired this special significance, it is not protected as a trade name. Acquisition of this special significance, rather than priority of use, is, therefore, a necessary condition of protection . . .' Stated otherwise, 'Anyone may use a title if there is no secondary significance.' " (Family Record Plan, Inc. v. Mitchell (1959) 172 Cal.App.2d 235, 243; Restatement of Torts, § 716 [a trade name is a designation which: "(a) is adopted and used by a person to denominate goods which he markets or services which he renders or a business which he conducts, or has come to be so used by others, and [¶] (b) through its association with such goods, services or business, has acquired a special significance as the name thereof, and [¶] (c) the use of which for the purpose stated in Clause (a) is prohibited neither by a legislative enactment nor by an otherwise defined public policy"].)
Redding Gastroenterology is a geographical, generic, and descriptive designation. Thus, whether viewed as secondary meaning necessary for relief under the unfair competition law or special significance under trade name law (to establish a property right for standing under the unfair competition law), the parties respectively had to show that its/their use of the name Redding Gastroenterology resulted in the name being synonymous with that party's services or business in the public mind to be entitled to an injunction precluding the other from using the name under the unfair competition law.
Although defendants do not frame their argument on appeal in terms of secondary meaning or special significance, they argue plaintiff introduced no evidence that it used the name Redding Gastroenterology, LLC in commerce, advertised the name, offered any products or services under the name, that anyone attributed significance to the name, or it has good will in the name. Thus, they posit, "[t]here is no evidence in the record that anyone in the public would see [Redding Gastroenterology, LLC] as an identifier for services or products" such that it qualifies as a trade name subject to protection. As far as we can tell, plaintiff's response is that it "had an exclusive, proprietary right to use of the name" under section 14415 because it had filed "articles of incorporation eight years previously." We disagree with plaintiff.
By statute, a person may be entitled to a rebuttable presumption to the exclusive right to use a fictitious business name as a trade name if he or she: (1) was the first to file a fictitious business name statement under section 17910 in the county in which he or she "is actually engaged in a trade or business utilizing such fictitious business name or a confusingly similar name" (§ 14411); or (2) was the first to file articles of incorporation pursuant to Corporations Code section 200 or obtain a certificate of qualification under Corporations Code sections 2105 and 2106 containing the corporate name and "is actually engaged in a trade or business utilizing that corporate name or a confusingly similar name" (§ 14415). As between competing claimants under sections 14411 and 14415, the first to file and use the name is entitled to the presumption. (§ 14416.)
The filing of a fictitious business name statement or articles of incorporation does not of itself authorize use of the fictitious business name or corporate name in violation of other state and federal statutory rights or the common law, "including rights in a trade name." (§§ 14417, 14418.) The presumptions created by these statutes affect the burden of proof only and do not establish substantive rights. (§§ 14411, 14415.) Section 14402 provides "[a]ny court of competent jurisdiction may restrain, by injunction, any use of trade names in violation of the rights defined in this chapter."
As far as we can tell, neither party pursued an injunction under this code section before the trial court. Defendants raise section 14402 in their reply brief for the first time, stating it "empowers Singh to obtain injunctive relief to protect his trade name." They provide no argument as to why this court should consider the argument for the first time on appeal and we decline to consider an argument raised for the first time in the reply brief. (Malmstrom v. Kaiser Aluminum & Chem. Corp. (1986) 187 Cal.App.3d 299, 320.) --------
Section 14415 does not assist plaintiff. It applies only to corporations having filed articles of incorporation in accordance with Corporations Code section 200. Plaintiff is not a corporation and did not file articles of incorporation. It instead filed articles of organization as a limited liability company. There is no provision like section 14415 in chapter 3 of division 6 of the code applicable to limited liability companies; thus, there is no statutory rebuttable presumption that Redding Gastroenterology, LLC is a trade name. Perhaps this was an oversight by the Legislature; it can plausibly be argued that there is no meaningful difference between the filing of articles of incorporation and articles of organization -- they serve the same function, just for different business structures. But, even if plaintiff were entitled to a rebuttable presumption, it would not prevail because it failed to establish the name acquired a secondary meaning or special significance entitling it to relief under the unfair competition law.
The only evidence plaintiff introduced at trial relating to the use of the name Redding Gastroenterology, LLC was with regard to Associates identification of the name as an owner on license applications for the Center. Plaintiff introduced no evidence that Redding Gastroenterology, LLC is a name associated with any business, product, or service in the public mind. On these facts, we do not find substantial evidence in the record to support the trial court's judgment in favor of plaintiff under section 17200 because there are no facts establishing the name acquired a secondary meaning or special significance. Given this conclusion, we do not address the remainder of defendants' arguments on this issue.
Turning to defendants' section 17200 cause of action in the cross-complaint, we note defendants assert without citation to the record or authority in their opening brief that they met their burden of proof "through [their] use of the name in public and with the public and [their] patients" and by "investing over $25,000 in the use and advertisement of the name." In their reply brief, defendants again assert without citation to the record or authority that they are entitled to relief under section 17200 because they filed a fictitious business name statement under the name Redding Gastroenterology, advertised under the name, and opened a medical practice under the name in an office displaying the name on the sign. They have not provided any argument with citation to the record and authority, however, that their use of the name Redding Gastroenterology resulted in the name being synonymous with their services or business in the public mind such that the name has acquired a secondary meaning or special significance entitling them to relief under the unfair competition law. (Cf. Family Record Plan, Inc. v. Mitchell, supra, 172 Cal.App.2d at pp. 243-244 [respondent introduced sufficient evidence of increased sales, contracts, and employees over several years and advertising expenses to support "the conclusion that a sufficient impact had been made upon the public mind, and a secondary meaning thereby acquired"].) As such, the argument is deemed forfeited. (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785 [failure to support a point with argument and authority will result in issue being deemed forfeited]; Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246 [failure to support argument with necessary citations to the record will result in argument being deemed forfeited].)
II
The Trial Court Did Not Rule In Favor Of Plaintiff On The Fiduciary Duty Cause Of Action
Defendants contend the trial court "erred in finding that Singh breached his fiduciary duty to [plaintiff]." Specifically, they argue the court erred because Singh had no duty to forbear from using the name Redding Gastroenterology and Singh's use of the name did not cause any injury to plaintiff. Plaintiff correctly explains, however, that the trial court ruled against plaintiff on the breach of fiduciary duty cause of action because plaintiff had not established damages proximately caused by the breach, an element necessary for breach of fiduciary duty. (Fair v. Bakhtiari (2011) 195 Cal.App.4th 1135, 1153 [breach of fiduciary duty requires damages as an element].)
Where, as here, "damages are an element of a cause of action, the cause of action does not accrue until the damages have been sustained. [Citation.] 'Mere threat of future harm, not yet realized, is not enough.' [Citation.] 'Basic public policy is best served by recognizing that damage is necessary to mature such a cause of action.' [Citation.] Therefore, when the wrongful act does not result in immediate damage, 'the cause of action does not accrue prior to the maturation of perceptible harm.' " (City of Vista v. Robert Thomas Securities, Inc. (2000) 84 Cal.App.4th 882, 886.) "The resulting damage must be 'actual monetary loss.' " (Id. at p. 887.)
Because the trial court did not rule in favor of plaintiff on the breach of fiduciary cause of action, we do not consider defendants' arguments in that regard. To the extent defendants challenge the trial court's finding that Singh breached his fiduciary duty to plaintiff as an element of the unfair competition law cause of action, we need not consider the argument in light of our conclusion ante.
DISPOSITION
The judgment in favor of plaintiff on its complaint and the award of attorney fees and costs to plaintiff are reversed. The judgment is otherwise affirmed. The matter is remanded to the trial court to reconsider the attorney fees and costs award to plaintiff in light of this opinion. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
/s/_________
Robie, Acting P. J. We concur: /s/_________
Mauro, J. /s/_________
Renner, J.