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`UNITED STATES DISTRICT COURT
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`DISTRICT OF NEVADA
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`Plaintiff
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`LAS VEGAS SKYDIVING ADVENTURES
`LLC,
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`v.
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`GROUPON, INC.,
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`Defendant
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`Case No.: 2:18-cv-02342-APG-VCF
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`Order (1) Granting Defendant’s Motion to
`Dismiss in Part and (2) Overruling
`Plaintiff’s Objection
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`[ECF Nos. 9, 28]
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`Las Vegas Skydiving Adventures LLC (LV Skydiving) sued Groupon, Inc. (Groupon),
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`alleging antitrust violations, trademark infringement, and Nevada common law claims for
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`misappropriation of commercial properties and unjust enrichment. Groupon moves to dismiss,
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`arguing that LV Skydiving lacks antitrust standing, Groupon and LV Skydiving are not
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`competitors, and LV Skydiving has not demonstrated that Groupon engages in predatory pricing.
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`It also argues that LV Skydiving’s infringement claim fails because Groupon does not use the
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`mark “FYROSITY” in its metadata and a reasonably prudent consumer is not likely to be
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`confused by who the service provider is when searching on its website for skydiving services in
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`southern Nevada. Finally, Groupon argues that the state law claims should be dismissed as
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`insufficiently pleaded and repetitive of the trademark infringement claim.
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`LV Skydiving responds that it has sufficiently demonstrated that Groupon has gained
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`control of the southern Nevada tandem skydiving services market and that Groupon affiliates’
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`low prices for skydiving services has resulted in harm to LV Skydiving’s profits. It argues that
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`Groupon’s predatory and exclusionary conduct includes the misuse of its registered mark. LV
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`Skydiving further contends that it has properly alleged that Groupon uses the mark
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`Case 2:18-cv-02342-APG-VCF Document 30 Filed 10/23/19 Page 2 of 12
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`“FYROSITY” to mislead potential customers to Groupon affiliates and that the state law claims
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`are sufficiently pleaded.
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`After Magistrate Judge Ferenbach granted limited discovery pending resolution of the
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`motion to dismiss, LV Skydiving filed a motion for sanctions. Magistrate Judge Ferenbach
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`denied that motion. LV Skydiving objects to that decision. I grant Groupon’s motion to dismiss
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`in part and I overrule LV Skydiving’s objection to Magistrate Judge Ferenbach’s order.
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`I. BACKGROUND1
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`LV Skydiving “offers services to individuals who wish to have the experience of jumping
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`out of an airplane while tethered to an experienced parachutist.” ECF No. 1 at 3. It offers such
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`services in southern Nevada using the registered mark “FYROSITY.” Id. Groupon provides
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`“discount certificates that Groupon’s customers may use with businesses that maintain a
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`relationship with Groupon to help enable Groupon to provide” skydiving services. Id. LV
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`Skydiving alleges that Groupon controls the southern Nevada skydiving services market by
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`aggressively recruiting businesses to become affiliates and then setting skydiving services at
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`“deeply discounted” prices, which harms LV Skydiving’s business. Id. at 3-4.
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`LV Skydiving also alleges that Groupon uses LV Skydiving’s name and registered mark
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`in its website metadata without permission and engages in such infringement to divert customers
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`looking for skydiving services to Groupon’s site. Id. at 4. It alleges that consumers using LV
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`Skydiving’s mark as a search term in a general internet search are diverted to Groupon. Id. And
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`it alleges that Groupon’s website is constructed in a way so that consumers can search
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`specifically for LV Skydiving’s mark and be misled into finding information on Groupon
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`affiliates. Id. For example, LV Skydiving points to a Facebook post by Groupon that provides a
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`1 These facts are a summary of LV Skydiving’s allegations in its complaint. See ECF No. 1.
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`link to search results on Groupon’s website for “skydive Fyrosity.” Id. at 5. LV Skydiving
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`alleges that the link to the search results is intended to obfuscate the fact that the advertised
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`services are by Groupon affiliates and not LV Skydiving. Id. It also alleges that as a result of
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`Groupon’s behavior, it has lost potential clients and suffered economic harm. Id. at 5-6.
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`LV Skydiving asserts five causes of action: 1) monopolization under 15 U.S.C. § 2
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`(Pricing); 2) monopolization under 15 U.S.C. § 2 (intellectual property misuse); 3) registered
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`trademark infringement under 15 U.S.C. § 1114(a)(1); 4) misappropriation of commercial
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`properties under Nevada common law; and 5) unjust enrichment under Nevada common law. Id.
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`at 6-9.
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`II. ANALYSIS
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`In considering a motion to dismiss, “all well-pleaded allegations of material fact are taken
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`as true and construed in a light most favorable to the non-moving party.” Wyler Summit P’ship v.
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`Turner Broad. Sys., Inc., 135 F.3d 658, 661 (9th Cir. 1998). However, I do not assume the truth
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`of legal conclusions merely because they are cast in the form of factual allegations. See Clegg v.
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`Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994). A plaintiff must make sufficient
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`factual allegations to establish a plausible entitlement to relief. Bell Atl. Corp. v. Twombly, 550
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`U.S. 544, 556 (2007). Such allegations must amount to “more than labels and conclusions, [or] a
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`formulaic recitation of the elements of a cause of action.” Id. at 555.
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`A. Monopolization Under 15 U.S.C. § 2
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`Section 2 of the Sherman Act prohibits persons from monopolizing, or attempting to
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`monopolize, “any part of the trade or commerce among the several States, or with foreign
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`nations.” 15 U.S.C. § 2. “There are three essential elements to a successful claim of Section 2
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`monopolization: (a) the possession of monopoly power in the relevant market; (b) the willful
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`acquisition or maintenance of that power; and (c) causal antitrust injury.” Name.Space, Inc. v.
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`Internet Corp. for Assigned Names & Nos., 795 F.3d 1124, 1131 (9th Cir. 2015) (citation
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`omitted).
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`Only those who meet the requirements for antitrust standing may pursue an antitrust
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`claim. Glen Holly Entm’t, Inc. v. Tektronix, Inc., 352 F.3d 367, 371 (9th Cir. 2003). Antitrust
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`standing requires the plaintiff to adequately allege antitrust injury. Id. Antitrust injury is “injury
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`of the type the antitrust laws were intended to prevent and that flows from that which makes
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`defendants’ acts unlawful.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489
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`(1977). “A plaintiff who is neither a competitor nor a consumer in the relevant market does not
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`suffer antitrust injury.” Vinci v. Waste Mgmt., Inc., 80 F.3d 1372, 1376 (9th Cir. 1996) (quotation
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`and citation omitted). It is not enough that two firms compete; rather they must compete in the
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`market in which trade was restrained. Exhibitors’ Serv., Inc. v. Am. Multi-Cinema, Inc., 788 F.2d
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`574, 579 (9th Cir. 1986).
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`In analyzing whether the plaintiff and defendant participate in the same market, I look to
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`the “reasonable interchangeability of use or the cross-elasticity of demand between the services
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`provided by [Groupon] and by [LV Skydiving].” Bhan v. NME Hospitals, Inc., 772 F.2d 1467,
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`1471 (9th Cir. 1985); see also Twin City Sportservice, Inc. v. Charles O. Finley & Co., 512 F.2d
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`1264, 1271 (9th Cir. 1975) (“[W]here there is a high degree of substitutability in the use of two
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`commodities, it may be said that the cross-elasticity of demand between them is relatively high,
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`and therefore the two should be considered in the same market.”). In Bhan, the Ninth Circuit
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`found that nurse anesthetists and M.D. anesthesiologists competed in the same market because
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`the services provided were reasonably interchangeable in that nurse anesthetists “still duplicate
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`many of the services provided by an M.D. anesthesiologist” despite requiring the supervision of
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`a physician to conduct such services. 772 F.2d at 1471.
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`LV Skydiving states that it offers tandem skydiving services to customers in southern
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`Nevada. It alleges that Groupon provides discount certificates to customers to use at businesses
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`affiliated with Groupon that provide skydiving services in southern Nevada. The relevant market
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`consists of “businesses that sell[] the Relevant Services to residents of and visitors to southern
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`Nevada who wish to have the experience of jumping out of an airplane while tethered to an
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`experienced parachutist.” See ECF No. 1 at 3.
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`However, LV Skydiving has not plausibly alleged that Groupon provides services that are
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`interchangeable with other tandem skydiving service providers as required to be part of the same
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`market. This is unlike the situation in Bhan where the services provided were interchangeable.
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`Providing discount certificates to customers seeking tandem skydiving services is different (and
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`a separate market) from providing tandem skydiving services. Tandem skydiving businesses in
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`southern Nevada that allow Groupon to advertise their discounts compete in the same market as
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`LV Skydiving. Because LV Skydiving and Groupon are not competitors in the allegedly
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`restrained market, Groupon has not caused LV Skydiving antitrust injury under the Sherman Act.
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`Consequently, I dismiss LV Skydiving’s first and second causes of action with prejudice.
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`B. Registered Mark Infringement Under 15 U.S.C. § 1114(a)(1)
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` “To prevail on a claim of trademark infringement under the Lanham Act, 15 U.S.C.
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`§ 1114, a party must prove: (1) that it has a protectible ownership interest in the mark; and (2)
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`that the defendant’s use of the mark is likely to cause consumer confusion.” Network
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`Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1144 (9th Cir. 2011)
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`(quotation and citation omitted). This may include an initial interest confusion theory of
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`trademark infringement, where a customer has an initial interest in a competitor’s product
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`because the competitor misuses another’s mark. See Playboy Enters., Inc. v. Netscape Commc’ns
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`Corp., 354 F.3d 1020, 1025 (9th Cir. 2004). In determining the likelihood of confusion, courts
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`look to eight non-exhaustive factors: “[1] strength of the mark; [2] proximity of the goods; [3]
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`similarity of the marks; [4] evidence of actual confusion; [5] marketing channels used; [6] type
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`of goods and the degree of care likely to be exercised by the purchaser; [7] defendant’s intent in
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`selecting the mark; and [8] likelihood of expansion of the product lines.” Id. at 1145.
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`In cases involving internet search engines, courts also look to the “labeling and
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`appearance of the advertisements and the surrounding context on the screen displaying the
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`results page.” Multi Time Mach., Inc. v. Amazon.com, Inc., 804 F.3d 930, 936 (9th Cir. 2015)
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`(citation omitted). However, not every factor must be considered. See id. at 937. “The test for
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`likelihood of confusion is whether a reasonably prudent consumer in the marketplace is likely to
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`be confused as to the origin of the good or service bearing one of the marks.” Id. at 935.
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`LV Skydiving has a federally registered trademark. ECF No. 1-1 at 2-3. LV Skydiving
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`alleges that Groupon willfully uses the mark in its metadata without consent “in connection with
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`the sale, offering for sale, distribution, and advertising of services.” ECF No.1 at 7-8. It alleges
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`that Groupon uses the mark in its metadata to divert customers to other businesses affiliated with
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`Groupon that provide skydiving services in southern Nevada. Id. at 4. It alleges that this
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`diversion will likely cause confusion to consumers who seek LV Skydiving services, but instead
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`are directed to Groupon’s site. See ECF No. 1 at 4-5, 7-8.
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`Taking LV Skydiving’s allegations as true, LV Skydiving has plausibly alleged Groupon
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`used LV Skydiving’s protected mark in its metadata to cause initial interest confusion by
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`directing potential customers to offers to buy a skydiving service from other businesses
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`associated with Groupon.2 While Groupon argues that any alleged metadata infringement would
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`not be indexed by search engines to influence results and would not cause likely confusion, that
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`involves issues of fact outside the complaint’s allegations. I therefore deny Groupon’s motion to
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`dismiss LV Skydiving’s third cause of action for trademark infringement.
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`C. State Law Claims
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`1. Misappropriation of Commercial Properties
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`LV Skydiving asserts a claim for misappropriation of commercial properties under
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`Nevada common law. Groupon moves to dismiss this claim, arguing that it is not a recognized
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`cause of action under state or federal law. Alternatively, Groupon argues that LV Skydiving’s
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`allegations are vague and insufficient to support a separate basis for liability as they are
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`duplicative of its trademark infringement claim. LV Skydiving responds that this court has
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`recognized the claim for misappropriation of commercial properties in at least one published
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`decision and multiple unpublished decisions. In its reply, Groupon argues that the law already
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`provides a clear remedy for trademark infringement (the alleged misappropriation), so LV
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`Skydiving cannot seek a separate form of relief.
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`Nevada has not yet recognized a claim for misappropriation of commercial properties.
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`However, for the purpose of this motion, I follow other decisions of this court that have
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`suggested that the Supreme Court of Nevada would recognize such a claim. See, e.g. Salestraq
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`2 Part of LV Skydiving’s claim alleges that Groupon posted a predatory link on Facebook that
`opened to a Groupon page with “skydive Fyrosity” in the search results. ECF No. 1 at 5. LV
`Skydiving alleges Groupon posted this link to confuse consumers and divert potential customers
`to Groupon affiliates. To the extent that LV Skydiving agrees with Groupon’s depiction of the
`link in its motion to dismiss (ECF No. 9-1 at 8), I note that recent Ninth Circuit case law has held
`that where a “search results page clearly labels the name and manufacturer of each product
`offered for sale and even includes photographs of the items, no reasonably prudent consumer
`accustomed to shopping online would likely be confused as to the source of the products.” Multi
`Time Mach., Inc., 804 F.3d at 933.
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`Am., LLC v. Zyskowski, No. 2:08-cv-01368-LRH-LRL, 2009 WL 1652170, at *3 (D. Nev. June
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`10, 2009), aff'd, 334 F. App’x 125 (9th Cir. 2009) (noting that Nevada recognizes claims closely
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`related to commercial misappropriation and that California, which Nevada has followed when
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`recognizing new commercial tort theories, recognizes a claim for misappropriation of non-trade-
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`secret information).
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`Neither party has laid out the elements of a claim for misappropriation of commercial
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`properties. Under California law, a plaintiff must show that “(a) the plaintiff invested substantial
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`time, skill or money in developing its property; (b) the defendant appropriated and used the
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`plaintiff’s property at little or no cost to the defendant; (c) the defendant’s appropriation and use
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`of the plaintiff’s property was without the authorization or consent of the plaintiff; and (d) the
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`plaintiff can establish that it has been injured by the defendant’s conduct.” Id.
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`Here, LV Skydiving has plausibly alleged it has a claim for misappropriation of
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`commercial properties, the elements of which would be different from a trademark infringement
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`claim. LV Skydiving spent time and money registering its mark. LV Skydiving alleges that
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`Groupon used the mark without permission and that such use has injured LV Skydiving in the
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`form of lost profits by diverting customers to competitors.
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`Because LV Skydiving has plausibly alleged a misappropriation of commercial properties
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`claim, I deny Groupon’s motion to dismiss this cause of action. As the case develops, LV
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`Skydiving will have to sufficiently present the legal support and the elements of a
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`misappropriation of commercial properties claim to ensure the claim moves forward.
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`2. Unjust Enrichment
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`LV Skydiving’s fifth cause of action alleges unjust enrichment under Nevada common
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`law. Groupon moves to dismiss this claim, arguing that LV Skydiving fails to demonstrate any
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`benefit conferred on Groupon by allegedly using the “FYROSITY” mark or how such a benefit
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`would be unjust. It also argues that LV Skydiving recites the elements of the claim, without
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`more, and the allegations are duplicative of the trademark infringement claim. LV Skydiving
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`responds that it has plausibly alleged that Groupon uses its registered mark without permission,
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`and that such use has benefited Groupon at LV Skydiving’s expense. LV Skydiving also
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`contends that its allegations are not duplicative of the trademark infringement claim, but even if
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`they are, LV Skydiving can plead in the alternative under Federal rule of Civil Procedure 8(d)(2)
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`and (3).
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`“Unjust enrichment occurs when one party confers a benefit on a second party which
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`accepts and retains the benefit under circumstances such that it would be inequitable to retain the
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`benefit without paying for its value.” Sierra Dev. Co. v. Chartwell Advisory Grp., Ltd., 223 F.
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`Supp. 3d 1098, 1107 (D. Nev. 2016) (citing Certified Fire Prot. Inc. v. Precision Constr., 283
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`P.3d 250, 257 (Nev. 2012)). “The doctrine of unjust enrichment or recovery in quasi contract
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`applies to situations where there is no legal contract but where the person sought to be charged is
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`in possession of money or property which in good conscience and justice he should not retain but
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`should deliver to another or should pay for.” Id. (citation omitted).
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`Here, LV Skydiving has plausibly alleged it has a claim for unjust enrichment, the
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`elements of which are different from a trademark infringement claim. LV Skydiving alleges that
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`Groupon uses its registered mark without permission. It also alleges that such use has diverted
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`potential LV Skydiving customers to Groupon affiliates that provide skydiving services. Thus,
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`Groupon has benefitted from using LV Skydiving’s mark. I deny Groupon’s motion to dismiss
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`LV Skydiving’s fifth cause of action.
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`/ / / /
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`D. LV Skydiving’s Objection to Magistrate Judge Ferenbach’s Denial of Sanctions
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`LV Skydiving filed a motion for spoliation sanctions, arguing that Groupon was non-
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`compliant with discovery proceedings and either destroyed or failed to preserve evidence that
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`Groupon used the “FYROSITY” mark in its metadata. See ECF No. 23. To support this claim,
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`LV Skydiving relied on an expert, who concluded that the mark must have existed or did exist in
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`Groupon’s metadata. Id. Groupon argues in response that it does not use the mark in its website
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`metadata and that LV Skydiving misunderstands the difference between a static website, where
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`the code and metadata is pre-written, and a dynamic website, where the code and metadata
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`changes depending on user input. See ECF No. 24. It argues that LV Skydiving failed to satisfy
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`the elements of spoliation, and even if spoliation occurred sanctions would not be the appropriate
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`remedy. Id.
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`Magistrate Judge Ferenbach heard LV Skydiving’s motion for sanctions on August 19,
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`2019 and denied the motion as unripe, noting that LV Skydiving’s motion was based on an
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`expert report when discovery was largely stayed. ECF No.27. LV Skydiving objects to this
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`decision, arguing that it conclusively established spoliation. ECF No. 28 at 3-4. It then asserts I
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`should deny the motion to dismiss due to Groupon’s spoliation. Id. at 4. Groupon responds that
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`LV Skydiving fails to demonstrate that Magistrate Judge Ferenbach’s order was “clearly
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`erroneous,” spoliation was not conclusively established, and sanctions would not be the
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`appropriate remedy even if it was established. ECF No. 29 at 7-10. Groupon also seeks
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`sanctions, arguing that LV Skydiving failed to comply with local rules and filed an unwarranted
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`motion. Id. at 11.
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`I review a magistrate judge’s order in a pretrial matter under a “clearly erroneous or
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`contrary to law” standard. 28 U.S.C. § 636(b)(1)(A); LR IB 1–3. A finding “is clearly erroneous
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`Case 2:18-cv-02342-APG-VCF Document 30 Filed 10/23/19 Page 11 of 12
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`when, although there is evidence to support it, the reviewing court on the entire evidence is left
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`with the definite and firm conviction that a mistake has been committed.” United States v. Ruiz-
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`Gaxiola, 623 F.3d 684, 693 (9th Cir. 2010). “An order is contrary to law when it fails to apply
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`or misapplies relevant statutes, case law, or rules of procedure.” United States v. Desage, 229
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`F.Supp.3d 1209, 1213 (D. Nev. 2017). I may affirm, reverse, or modify the magistrate judge’s
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`order and may also remand the matter to the magistrate judge with instructions. L.R. IB 3–1(b).
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`Magistrate Judge Ferenbach’s order denying the sanctions motion was not clearly
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`erroneous. Magistrate Judge Ferenbach determined that the motion for sanctions was unripe
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`because LV Skydiving filed a spoliation motion and introduced expert evidence when discovery
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`was stayed except for limited discovery on only two issues: (1) “who sets the prices that appear
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`on Groupon’s website” and (2) “written discovery and/or [] a 30(b)(6) deposition regarding any
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`use of LV Skydiving’s mark in Groupon’s website metadata.” See ECF No. 19 at 8.3 I agree
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`with this analysis. Additionally, because LV Skydiving’s trademark infringement claim survives
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`the motion to dismiss, discovery will continue and the parties can further explore whether LV
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`Skydiving’s “FYROSITY” mark is used in Groupon’s metadata. Thus, I overrule LV
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`Skydiving’s objection to Magistrate Judge Ferenbach’s order denying sanctions.
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`I THEREFORE ORDER that defendant Groupon, Inc.’s motion to dismiss (ECF No. 9)
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`is GRANTED IN PART. I dismiss LV Skydiving’s first and second causes of action with
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`prejudice.
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`3 Groupon requests sanctions under Local Rules IA 11-8 and IA 1-3. But Groupon provided no
`authority for its claim that sanctions should be granted for failing to meet and confer prior to
`filing a spoliation sanctions motion. As to LV Skydiving’s purported violation of the partial
`discovery stay, I follow Magistrate Judge Ferenbach’s decision to deny sanctions on that basis.
`ECF No. 27. I therefore deny Groupon’s request for sanctions.
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`Case 2:18-cv-02342-APG-VCF Document 30 Filed 10/23/19 Page 12 of 12
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`I FURTHER ORDER that plaintiff Las Vegas Skydiving Adventures LLC’s objection to
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`Magistrate Judge Ferenbach’s order denying sanctions (ECF No. 28) is OVERRULED.
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`ANDREW P. GORDON
`UNITED STATES DISTRICT JUDGE
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`DATED this day of October, 2019.
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